Question

11.4: a. F sells her interest in the equa al FG partnership for $20,000 cash. F's basis, including her share of partnership liabilities, is $40,000. Partnership liabilities are split equally between F and G before the sale. F has owned the partnership interest for more than one year. The partnership owns a $65,000, and are col lection of valuable antiques (holding period: two years) that have a FMV of $50,000 and a basis of $20,000. What is F's gain or loss, and what is the character? b. Would your answer be any different if her holding period for the partnership interest was less than one year?

Answer 1

a)

F' overall gain = total amount realized - her basis in partnership

= [$20000(cash) + $32500(share in liability $65000/2)] - $40000

= $52500 - $40000

= $12500

Her share of partnership collectible gain on collection of valuable antiques = ($50000-$20000)/2 = $15000

She, will therefore recognize a collectible gain of $15000 and a long term loss of $2500.

B)

Yes, than the unrealized collectible gain would not have to he recognized by her. and she would have a short term capital gain of $12500 on the sale.

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