Newton is a one-third owner of ProRite Partnership. Newton has decided to sell his interest in the business to Dunja for $68,000 cash plus the assumption of his share of ProRite's liabilities. Assume Newton's inside and outside bases in ProRite are equal. ProRite shows the following balance sheet as of the sale date: Tax Basis $ 96,500 28,000 Assets Cash Receivables Inventory Land Totals Liabilities and capital: Liabilities Capital-Newton Capital-Barbara Capital-Liz Totals FMV $ 96,500 28,000 110,750 23,500 $ 201,250 $ 258,750 40,250 36,500 $ 60,000 47,083 47,084 47,083 $ 201,250 What are the amount and character of Newton's recognized gain or loss?
Newton is a one-third owner of ProRite Partnership. Newton has decided to sell his interest in the business to Dunja for $68,000 cash plus the assumption of his share of ProRite's liabilities. Assume Newton's inside and outside bases in ProRite are equal. ProRite shows the following balance sheet as of the sale date: Tax Basis $ 96,500 28,000 Assets Cash Receivables Inventory Land Totals Liabilities and capital: Liabilities Capital-Newton Capital-Barbara Capital-Liz Totals FMV $ 96,500 28,000 110,750 23,500 $ 201,250 $ 258,750 40,250 36,500 $ 60,000 47,083 47,084 47,083 $ 201,250 What are the amount and character of Newton's recognized gain or loss?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Newton is a one-third owner of ProRite Partnership. Newton has decided to sell his interest in the business to Dunja for
$68,000 cash plus the assumption of his share of ProRite's liabilities. Assume Newton's inside and outside bases in
ProRite are equal. ProRite shows the following balance sheet as of the sale date:
Assets
Cash
Receivables
Inventory
Land
Totals
Liabilities and
capital:
Liabilities
Capital-Newton
Capital-Barbara
Capital-Liz
Totals
Tax Basis
$ 96,500
28,000
40, 250
36,500
FMV
$ 96,500
28,000
110, 750
23,500
$ 201, 250 $ 258,750
$ 60,000
47,083
47,084
47,083
$ 201, 250
What are the amount and character of Newton's recognized gain or loss?
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