Question

Shauna is a 50 percent partner in the SH Partnership. Shauna sells one-half of her interest to Kara for $60,000 cash. Just before the sale, Shauna's basis in her entire partnership interest is $150,000, including her $60,000 share of the partnership liabilities. SH's assets on the sale date are as follows:

Assets

	Basis	FMV
Cash	$80,000	$80,000
Inventory	60,000	$180,000
Land held for investment	160,000	100,000
Total	$300,000	$360,000

What is the amount and character of Shauna's gain or loss on the sale?

Group of answer choices

$30,000 ordinary income and $15,000 capital loss.

$45,000 capital gain.

$15,000 capital loss.

$15,000 ordinary income and $30,000 capital gain.

Answer 1

(Q) Shauna is a 50 percent partner in the SH Partnership. Shauna sells one-half of her interest to Kara for $60,000 cash. Just before the sale, Shauna's basis in her entire partnership interest is $150,000, including her $60,000 share of the partnership liabilities.What is the amount and character of Shauna's gain or loss on the sale?

(Ans) Option A - $30,000 ordinary income and $15,000 capital loss.​​​​​​​

• Explanation :- Shauna's total gain from the sale of half of her interest is $15,000 (amount realized of$60,000 cash plus $30,000 debt relief minus her outside basis of $75,000). SH has hot assets (inventory) and the portion Shauna sells is $30,000 ($120,000 appreciation times 25%). This represents the ordinary income from the sale. The difference between the total gain and the ordinary income is a $15,000 capital loss