At the end of last year, Alex, a 25% partner in the four-person MSA Partners, had an outside basis of $30,000, which includes her $12,000 share of MSA's liabilities. On January 1 of the current year, Alex sells her partnership interest to Jordan for a cash payment of $20,000, and Jordan assumes her share of MSA's debt. MSA has no hot assets. What is the amount and character of Alex's recognized gain or loss on the sale? A. $10,000 capital gain B. $2,000 capital gain C. $10,000 ordinary income D. $2,000 ordinary loss
At the end of last year, Alex, a 25% partner in the four-person MSA Partners, had an outside basis of $30,000, which includes her $12,000 share of MSA's liabilities. On January 1 of the current year, Alex sells her partnership interest to Jordan for a cash payment of $20,000, and Jordan assumes her share of MSA's debt. MSA has no hot assets. What is the amount and character of Alex's recognized gain or loss on the sale? A. $10,000 capital gain B. $2,000 capital gain C. $10,000 ordinary income D. $2,000 ordinary loss
Chapter14: Choice Of Business Entity—operations And Distributions
Section: Chapter Questions
Problem 47P
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Transcribed Image Text:At the end of last year, Alex, a 25% partner in the four-person MSA Partners,
had an outside basis of $30,000, which includes her $12,000 share of MSA's
liabilities. On January 1 of the current year, Alex sells her partnership interest
to Jordan for a cash payment of $20,000, and Jordan assumes her share of
MSA's debt. MSA has no hot assets.
What is the amount and character of Alex's recognized gain or loss on the sale?
A. $10,000 capital gain
B. $2,000 capital gain
C. $10,000 ordinary income
D. $2,000 ordinary loss
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