Problem 11-49 (LO. 7, 9)

Diana, a partner in the cash basis HDA Partnership, has a one-third interest in partnership profits and losses. The partnership's balance sheet at the end of the current year is as follows:

	Basis		FMV			Basis		FMV
Cash	$120,000		$120,000		Hannah, capital	$90,000		$250,000
Receivables	0		240,000		Diana, capital	90,000		250,000
Land	150,000		390,000		Alexis, capital	90,000		250,000
Total	$270,000		$750,000		Total	$270,000		$750,000

Diana sells her interest in the HDA Partnership to Kenneth at the end of the current year for cash of $250,000.

If an amount is zero, enter "0".

a. Diana will report ordinary income of $_____ and capital gains of $_____ from the sale.

b. If the partnership does not make an optional adjustment-to-basis election, Kenneth must report $_____ of _____ (capital gain income, ordinary income) when the receivables are collected.

c. If the partnership did make an optional adjustment-to-basis election, what are the type and amount of income that Kenneth must report in the next year when the receivables are collected?

Type _____ (capital gain income, ordinary income)
$ Amount	$

What are the type and amount of income that Kenneth must report in the next year when the land (which is used in the HDA Partnership's business) is sold for $420,000? Assume no other transactions occurred that year.

Type ________ (S1231 or ordinary income, return of capital)
$ Amount	$