At the end of last year, Jessica, a 25% partner in the four-person JLR partnership, has an outside basis of $30,000, including her $12,000 share of JLR debt. On January 1 of the current year, Jessica sells her partnership interest to Oliver for a cash payment of $20,000 and the assumption of her share of JLR's debt. JLR has no hot assets. What is the amount and character of Jessica's recognized gain or loss on the sale? A. $10,000 capital loss. B. $2,000 ordinary income. C. $2,000 capital gain. D. $8,000 ordinary income.
At the end of last year, Jessica, a 25% partner in the four-person JLR partnership, has an outside basis of $30,000, including her $12,000 share of JLR debt. On January 1 of the current year, Jessica sells her partnership interest to Oliver for a cash payment of $20,000 and the assumption of her share of JLR's debt. JLR has no hot assets. What is the amount and character of Jessica's recognized gain or loss on the sale? A. $10,000 capital loss. B. $2,000 ordinary income. C. $2,000 capital gain. D. $8,000 ordinary income.
Chapter14: Choice Of Business Entity—operations And Distributions
Section: Chapter Questions
Problem 47P
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What is the amount and character of Jessica's recognised gain or loss on the sale for this financial accounting question?
Transcribed Image Text:At the end of last year, Jessica, a 25% partner in the four-person JLR partnership,
has an outside basis of $30,000, including her $12,000 share of JLR debt. On January
1 of the current year, Jessica sells her partnership interest to Oliver for a cash
payment of $20,000 and the assumption of her share of JLR's debt. JLR has no hot
assets.
What is the amount and character of Jessica's recognized gain or loss on the sale?
A. $10,000 capital loss.
B. $2,000 ordinary income.
C. $2,000 capital gain.
D. $8,000 ordinary income.
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