Gabby is a 1/3 partner (capital and profits) in GAB Partnership (cash basis, calendar year partnership). At the beginning of the year, Gabby's outside basis is $100,000. Since the beginning of the year, GAB has had ordinary business income of $60,000. The partnership currently has the following assets:

• Cash: $300,000
• Unrealized receivables: FMV = $90,000 ($0 inside basis)
• Land: FMV = $90,000; $60,000 inside basis (purchased by GAB Partnership)

1. If Gabby sells her 1/3 partnership interest to George for $160,000, what is the amount of Gabby's gain or loss recognized? Enter gain as a positive number or loss as a negative number. Do not include in your answer the ordinary income that will be allocated to Gabby from the $60,000 ordinary business income, but make sure to adjust Gabby's basis before determining her gain/loss recognized.
2. Gabby sold her 1/3 partnership interest to George for $160,000. What amount of the gain on the sale is capital gain?

Question:

Maria was a 10% partner in M Partnership. Maria's outside basis in her partnership interest is $200,000 (just prior to distribution). This year, the partnership distributed the following to Maria in a proportionate distribution that liquidated the entire partnership:

• Cash: $50,000
• Inventory: FMV = $125,000; inside basis = $100,000 (hot asset)

What is Maria's recognized gain or loss on the distribution?

Answer rating: 100% (QA)

Answer For the first question Gabbys outside basis at the beginning of the year was 100000 and since then GAB Partnership had ordinary business income of 60000 Therefore Gabbys adjusted basis in her p... View the full answer