Sale of Partnership Interest and Termination. Clay owned 60% of the CAP Partnership

and sold one-half of his interest (30%) to Steve for $75,000 cash. Before the sale, Clay's

basis in his entire partnership interest was $168,000 including his $30,000 share of partnership

liabilities and his share of income up to the sale date. Partnership assets on the sale

date were

Assets Partnership's Basis FMV

Cash $ 50,000 $ 50,000

Inventory 30,000 60,000

Land 200,000 190,000

Total $280,000 $300,000

a. What are the amount and character of Clay's recognized gain or loss on the sale? What

is his remaining basis in his partnership interest?

b. What is Steve's basis in his partnership interest?

c. How will the partnership's basis in its assets be affected?

d. How would your answers to Parts a and c change if Clay sold his entire interest to Steve

for $150,000 cash?