Please do not provide solution in image formate thank you. A, B, C, and D are equal partners in the ABCD partnership. The partnership’s current balance sheets are as follows. Partner A agrees to sell her interest in the partnership to new partner E for $2,500 in cash, plus assumption of her $4,500 share of partnership debt. A’s tax basis in her partnership interest is$5,500 ($1,000 tax capital account plus $4,500 share of partnership debt). The selling price of her interest is $7,000 ($2,500 cash plus $4,500 debt relief). Thus, she has a $1,500 gain on the sale. Required Calculate A’s ordinary income and capital gain income on the sale of her partnership interest.
Please do not provide solution in image formate thank you. A, B, C, and D are equal partners in the ABCD partnership. The partnership’s current balance sheets are as follows. Partner A agrees to sell her interest in the partnership to new partner E for $2,500 in cash, plus assumption of her $4,500 share of partnership debt. A’s tax basis in her partnership interest is$5,500 ($1,000 tax capital account plus $4,500 share of partnership debt). The selling price of her interest is $7,000 ($2,500 cash plus $4,500 debt relief). Thus, she has a $1,500 gain on the sale. Required Calculate A’s ordinary income and capital gain income on the sale of her partnership interest.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Please do not provide solution in image formate thank you.
A, B, C, and D are equal partners in the ABCD
Partner A agrees to sell her interest in the partnership to new partner E for $2,500 in cash, plus assumption of her $4,500 share of partnership debt. A’s tax basis in her partnership interest is$5,500 ($1,000 tax capital account plus $4,500 share of partnership debt). The selling price of her interest is $7,000 ($2,500 cash plus $4,500 debt relief). Thus, she has a $1,500 gain on the sale.
Required
Calculate A’s ordinary income and
Transcribed Image Text:Assets
Cash
Accounts receivable
Inventory
Stock held as an investment
Land held as an investment
Liabilities and Capital
Recourse liabilities
Capital A
Capital B
Capital C
Capital D
Book Value
2,000
0
2,000
16,000
2,000
22,000
18,000
1,000
1,000
1,000
1,000
22,000
FMV
2,000
2,500
2,500
16,000
5,000
28,000
18,000
2,500
2,500
2,500
2,500
28,000
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