Consider the facts in problem 55 above.

Assume that rather than selling his partnership interest to an outsider, Chris receives a $120,000 cash distribution from the partnership in complete liquidation of his interest therein. How will the consequences differ from those associated with the sale?

Problem 55

Sowder Partners has the following balance sheets:

Chris has been approached by an unrelated third party with an offer to purchase his interest in the partnership.

a. What is the appropriate selling price for Chris's interest?

b. Assume he agrees to sell his interest for $120,000 cash. How much gain will he recognize on the sale, and what will be its character?

Transcribed Image Text:

Cash Accounts Receivable Inventory Sec. 1231 Property TOTAL ASSETS Capital, Teri Capital, Brandi Capital, Chris TOTAL CAPITAL Basis 12,000 0 84,000 24,000 120,000 45,000 15,000 60,000 120,000 FMV 12,000 70,000 120,000 38,000 240,000 80,000 40,000 120,000 240,000