Amy, a one-third partner, retires from the AJS Partnership on January 1 of the current year. Her basis in her partnership interest is $120,000 including her share of liabilities. Amy receives $160,000 in cash from the partnership for her interest. On that date, the partnership balance sheet is as follows:

a. What are the amount and character of Amy€™s recognized gain or loss?
b. How would your answers to Part a change if Joan and Stephanie each purchased one-half of Amy€™s partnership interest for $80,000 cash instead of having the partnership distribute the $160,000 in cash to Amy?

Transcribed Image Text:

Partnership's Basis FMV Assets Cash $180,000 S180,000 Receivables 60,000 60,000 Land Total S360,000 $540,000 Liabilities and capital: Liabilities S 60,000 s 60,000 CapitalAmy 100,000 160,000 -Joan 100,000 160,000 -Stephanie | 100000 160,000 Total S360,000 S540,000