Question

The SSC Partnership balance sheet includes the following assets on December 31 of the current year:

Basis FMV
Cash $180,000 $180,000
Accounts receivable -0- 60,000
Land 90,000 120,000
Total $270,000 $360,000

Susan, a 1/3 partner, has an adjusted basis of $90,000 for her partnership interest. If Susan sells her entire partnership interest to Emma for $100,000 cash, what is the amount and character of Susan's gain or loss from the sale?

a.$10,000 capital gain.
b.$10,000 ordinary income.
c.$20,000 ordinary income; $10,000 capital gain.
d.$10,000 capital loss; $20,000 ordinary income.

Answer 1

The amount and character of Susan's gain or loss from the sale is $10,000 capital loss; $20,000 ordinary income.

Step-by-step explanation:

Susan's share of unrealized receivables is $20,000 ($60,000 unrealized receivables into 1 by 3 interest). Susan will thus in the books record $20,000 of ordinary income and a $10,000 capital gain.

Susan’s share of unrealized receivable is $ 20000. Susan will recognize $20000 of ordinary income and a $10000 capital gain determined as the differnce the option shall be between the total gain of $30000 and the ordinary income of $20000. The answer from the given option is $10,000 capital loss; $20,000 ordinary income.