9. Charlie and Lola formed the LC partnership on 12/10/X4 by each contributing $50,000. They split profits and losses equally. On 9/7/X7 LC purchased a building for $60,000 cash plus a $400,000 mortgage. On 12/1/X7 when the building is still worth $460,000 and LCs only other assets are cash and $40,000 of uncollected accounts receivable with 0 basis, Charlie sold his partnership interest to JoJo for $250,000 cash.

Determine Charlies realized gain or loss and the character of his recognized gain or loss.

10. ABCD is a cash-basis partnership with four equal partners having the capital balances as shown below. ABCD gives E a 1/5 interest in the capital of the partnership as payment for services previously rendered by E to the ABCD partnership. The capital balances before admitting E are as follows:

Basis FMV

A $40,000 $200,000

B $40,000 $200,000

C $40,000 $200,000

D $40,000 $200,000

TOTAL $800,000

Determine the following:

1. the amount of income and its character that E must report and his outside basis;
2. A, B, C, and Ds expense and recognized gain and its character; and
3. the basis and FMV of the capital accounts of A, B, C, D, and E.