Required information [The following information applies to the questions displayed below.] Franklin, Jefferson, and Washington formed the Independence Partnership (a calendar-year-end entity) by contributing cash 10 years ago. Each partner owns an equal interest in the partnership and has an outside basis in their partnership interest of $104,000. On January 1 of the current year, Franklin sells their partnership interest to Adams for a cash payment of $122,000. The partnership has the following assets and no liabilities as of the sale date: Cash Accounts receivable Tax Basis FMV $ 18,000 0 $ 18,000 12,000 Inventory Equipment Stock investment Totals 69,000 180,000 45,000 81,000 225,000 30,000 $ 312,000 $ 366,000 The equipment was purchased for $240,000, and the partnership has taken $60,000 of depreciation. The stock was purchased seven years ago.
Franklin, Jefferson, and Washington formed the Independence Partnership (a calendar-year-end entity) by contributing cash 10 years ago. Each partner owns an equal interest in the partnership and has an outside basis in their partnership interest of $104,000. On January 1 of the current year, Franklin sells their partnership interest to Adams for a cash payment of $122,000. The partnership has the following assets and no liabilities as of the sale date: Tax Basis FMV Cash $ 18,000 $ 18,000
a. What is Franklin's overall gain or loss on the sale of their partnership interest?
b. What is the character of Franklin's gain or loss?
![Required information
[The following information applies to the questions displayed below.]
Franklin, Jefferson, and Washington formed the Independence Partnership (a calendar-year-end entity) by contributing
cash 10 years ago. Each partner owns an equal interest in the partnership and has an outside basis in their partnership
interest of $104,000. On January 1 of the current year, Franklin sells their partnership interest to Adams for a cash payment
of $122,000. The partnership has the following assets and no liabilities as of the sale date:
Cash
Accounts receivable
Tax Basis
FMV
$ 18,000
0
$ 18,000
12,000
Inventory
Equipment
Stock investment
Totals
69,000
180,000
45,000
81,000
225,000
30,000
$ 312,000
$ 366,000
The equipment was purchased for $240,000, and the partnership has taken $60,000 of depreciation. The stock was
purchased seven years ago.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd8ba6e31-46ab-41b7-a037-c8768fa417b1%2F1b25808b-e23c-4ee5-a3c3-67f8fc31af06%2F6k58dr_processed.png&w=3840&q=75)
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