Problem 21-38 (LO 21-1) (Algo)

Newton is a one-third owner of ProRite Partnership. Newton has decided to sell his interest in the business to Betty for $73,000 cash plus the assumption of his share of ProRites liabilities. Assume Newtons inside and outside bases in ProRite are equal. ProRite shows the following balance sheet as of the sale date:

	Tax Basis	FMV
Assets
Cash	$ 108,000	$ 108,000
Receivables	31,000	31,000
Inventory	41,500	100,750
Land	49,500	36,700
Totals	$ 230,000	$ 276,450
Liabilities and capital:
Liabilities	$ 60,000
CapitalNewton	56,667
CapitalBarbara	56,666
CapitalLiz	56,667
Totals	$ 230,000

What are the amount and character of Newtons recognized gain or loss?