Question

Jane contributed property with a basis of $40,000 and a value of $50,000 to the JO Partnership in exchange for a 20% interest in partnership capital and profits. During the first year of partnership operations, JO had net taxable income of $30,000 and tax-exempt interest income of $10,000. The partnership distributed $10,000 cash to Jane. On January 1 of year 2, Jane sells her partnership interest for $49,000. What is Jane's gain or loss on the sale

Answer 1

$11,000 gain.

Step-by-step explanation:

Calculation to determine Jane's gain or loss on the sale

First step is to calculate her basis

Basis=$40,000 + [20% × ($30,000 + $10,000)] - $10,000

Basis=$40,000+$8,000-$10,000

Basis =$38,000

Now let calculate Jane's gain or loss on the sale

Gain or loss on the sale =Selling price of $49,000 - basis of $38,000

Gain or loss on the sale = $11,000 gain.

Therefore Jane's gain or loss on the sale will be $11,000 gain