Nine years ago, Fred paid $20,000 cash for a 2 percent limited interest in a very profitable partnership. Every year Fred has properly included his distributive share of partnership income in taxable income. This year, Fred sold his interest to an unrelated party for $80,000 and computed a $60,000 gain recognized on sale.
Identify the tax issue or issues suggested by the following situations and state each issue in the form of a question.