Help with this tax scenario please. Note that 2018 U.S tax laws apply.

Kim, James and Paul own an accounting firm, but Kim is reaching retirement age after her ownership in the firm for more than 25 years. She decides to sell her interest in the partnership. She is a 1/3 member of the firm and as of the end of the year, these are the following stats for the firm:

Assets 

• Accounts Receivable: $75,000 

• Equipment: $150,000 ($400,000 in total and $250,000 in accumulated depreciation) 

Kim had the following stats: 

• Total basis in the partnership at the end of 2020: $350,000 

• Recourse Debt to Kim: $130,000 

• Nonrecourse debt: $0

• There is no qualified mortgage debt James and Paul are not interested in acquiring more of the firm, but Alice, who is a manager in the company is interested in purchasing Kim’s interest. She is willing to purchase it for $500,000 (using a loan from her 401k and the bank to finance it).

Calculate the following types of gains/losses:

a. Ordinary Gains/Loss

b. Capital Gains/Loss

c. Character of the Gains/Loss

Answer rating: 100% (QA)

Basis 350000 Cash Received 500000 Amount realized 5... View the full answer