Question

On November 1, Ashton sells her interest in XYZ partnership to Wayne for $200,000 cash and a release of liability of $30,000. Ashton’s basis at the beginning of the year was $125,000 (including the $30,000 of liability). Ashton’s share of income through November 1 was $45,000, and she received a $15,000 cash distribution earlier in the year. What are the tax consequences to Ashton of the sale of her partnership interest?

Answer 1

$75,000 capital gain

Step-by-step explanation:

Ashton’s basis at sales = Beginning basis + Share of income - Sash distribution = $125,000 + $45,000 - $15,000 = $155,000.

Capital gains (loss) = Sales proceed + Liability - Basis at sales = $200,000 + $30,000 - $155,000 = $75,000 gain.

Therefore, t he tax consequences to Ashton of the sale of her partnership interest is a capital gain of $75,000.