P1 is a one-third owner in ABC LLC. P1 sold his interest in ABC to B1 for $95,000 in cash (plus assumption of liabilities of ABC). Assume P1's inside andoutside basis in ABC are equal. ABC's balance sheet at the dale of sale follows. Determine the amount and character of the gain or loss P1 will realize at thesale.ASSETS:CashReceivablesInventoryLandLIABILITIES AND CAPITAL:LiabilitiesCapital-P1Capital-P2Capital-P3TaxBasis60,000 60,000120,000 120,00070,000 130,00050,000 55,000300,000 365,00030,00090,00090,00090,000FMV300,000 $10,000 ordinary gain and $10,000 capital gain$5,000 capital gain$5,000 capital loss$20,000 ordinary gain and $15,000 capital loss$5,000 ordinary income

When a partner sold a partnership interest to someone, the entity theory comes into play, not an…

P1 is a one-third owner in ABC LLC. P1 sold his interest in ABC to B1 for $95,000 in cash (plus assumption of liabilities of ABC). Assume P1's inside and outside basis in ABC are equal. ABC's balance sheet at the dale of sale follows. Determine the amount and character of the gain or loss P1 will realize at the sale. ASSETS: Cash Receivables Inventory Land Tax Basis 60,000 60,000 120,000 120,000 FMV 70,000 130,000 50,000 55,000 300,000 365,000 30,000 90,000 LIABILITIES AND CAPITAL: Liabilities Capital-P1 Capital-P2 Capital-P3 90,000 90,000 300,000

P1 is a one-third owner in ABC LLC. P1 sold his interest in ABC to B1 for $95,000 in cash (plus assumption of liabilities of ABC). Assume P1's inside and outside basis in ABC are equal. ABC's balance sheet at the dale of sale follows. Determine the amount and character of the gain or loss P1 will realize at the sale. ASSETS: Cash Receivables Inventory Land Tax Basis 60,000 60,000 120,000 120,000 FMV 70,000 130,000 50,000 55,000 300,000 365,000 30,000 90,000 LIABILITIES AND CAPITAL: Liabilities Capital-P1 Capital-P2 Capital-P3 90,000 90,000 300,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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