Travis and Alix Weber are equal partners in the Tralix Partnership, which does not have a §754 election in place. Alix sells one-half of her interest (25 percent) to Michael Tomei for $41,500 cash. Just before the sale, Alix’s basis in her entire partnership interest is $88,800, including her $41,500 share of the partnership liabilities. Tralix’s assets on the sale date are as follows: Tax Basis FMVCash$50,350 $50,350Inventory 41,500 136,000Land held for investment 85,750 54,600Totals$177,600 $240,950 a. What is the amount and character of Alix’s recognized gain or loss on the sale?multiple choice$23,625 of ordinary income and $5,775 of capital loss$5,775 of capital loss, $5,775 of ordinary income$5,775 of ordinary income and $23,625 of capital loss$35,700 of capital loss, $11,813 of ordinary incomeNeither gain nor loss recognized

Out of Recognized gain or loss share of change in inventory is treated as ordinary income

Answered: Travis and Alix Weber are equal…

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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Travis and Alix Weber are equal partners in the Tralix Partnership, which does not have a §754 election in place. Alix sells one-half of her interest (25 percent) to Michael Tomei for $41,500 cash. Just before the sale, Alix’s basis in her entire partnership interest is $88,800, including her $41,500 share of the partnership liabilities. Tralix’s assets on the sale date are as follows:

		Tax Basis	FMV
Cash	$	50,350	$	50,350
Inventory		41,500		136,000
Land held for investment		85,750		54,600
Totals	$	177,600	$	240,950

a. What is the amount and character of Alix’s recognized gain or loss on the sale?

multiple choice

$23,625 of ordinary income and $5,775 of capital loss
$5,775 of capital loss, $5,775 of ordinary income
$5,775 of ordinary income and $23,625 of capital loss
$35,700 of capital loss, $11,813 of ordinary income
Neither gain nor loss recognized

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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