Samantha, a one-third partner, has an adjusted basis of $90,000 for her partnership interest. If Samantha sells her entire partnership interest to Emma for $100,000 cash, what is the amount and character of Samantha'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.

Question

Business

Kobe White

25 November, 12:10

Samantha, a one-third partner, has an adjusted basis of $90,000 for her partnership interest. If Samantha sells her entire partnership interest to Emma for $100,000 cash, what is the amount and character of Samantha'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.

+2

Answers (1)

Know the Answer?

Marisa Roach · Answer 1

Correct option is D.

$10,000 capital loss; $20,000 ordinary income.

Explanation:

Samantha's share of unrealized receivables is $20,000 ($60,000 unrealized receivables * 1/3 interest). Susan will recognize $20,000 of ordinary income and a $10,000 capital gain determined as the difference between the total gain of $30,000 and the ordinary income of $20,000.