Marco, Jaclyn, and Carrie formed Daxing Partnership (a calendar-year-end entity) by contributing cash 10 years ago. Each partner owns an equal interest in the partnership. Marco, Jaclyn, and Carrie each have an outside basis in his/her partnership interest of $104,000. On January 1 of the current year, Marco sells his partnership interest to Ryan for a cash payment of $137,000. The partnership has the following assets and no liabilities as of the sale date:

		Tax Basis		FMV
Cash	$	18,000		$	18,000
Accounts receivable		0			12,000
Inventory		69,000			81,000
Equipment		180,000			225,000
Stock investment		45,000			75,000
Totals	$	312,000		$	411,000

The equipment was purchased for $240,000, and the partnership has taken $60,000 of depreciation. The stock was purchased seven years ago.

4.

value: 1.00 points

Required information

a. What are the hot assets [751(a)] for this sale? (Select all that apply.)

Accounts receivable

Inventory

Stock investment

Potential depreciation recapture in the equipment

References

eBook & Resources

Check All That ApplyDifficulty: 2 MediumLearning Objective: 21-01 Determine the tax consequences to the buyer and seller of the disposition of a partnership interest, including the amount and character of gain or loss recognized.

5.

value: 1.00 points

Required information

b. What is Marcos gain or loss on the sale of his partnership interest?

References

eBook & Resources

ProblemDifficulty: 2 MediumLearning Objective: 21-01 Determine the tax consequences to the buyer and seller of the disposition of a partnership interest, including the amount and character of gain or loss recognized.

Check my work

6.

value: 1.00 points

Required information

c. What is the character of Marcos gain or loss?

	$23,000 ordinary income and $10,000 capital gain
	$10,000 ordinary income and $23,000 capital gain
	$33,000 ordinary income
	$33,000 capital gain
	None of these

References

eBook & Resources

Multiple ChoiceDifficulty: 2 MediumLearning Objective: 21-01 Determine the tax consequences to the buyer and seller of the disposition of a partnership interest, including the amount and character of gain or loss recognized.

Check my work

7.

value: 1.00 points

Required information

d. What are Ryans inside and outside bases in the partnership on the date of the sale?