• Sara Smiles is tired and wants to leave the glamour's world of hand modeling for a life as a monastic nun. Sara sells her 10% share in We Got Part Modeling Agency for $500,000 plus release from partnership debt of $200,000.

• What is Sara's recognized gain or loss from the sale?

• $500,000 (cash received)
• + 200,000 (debt relief)
• = $700,000 (Amount Realized)
• - $569,000 (Basis)
• = $131,000 (Capital Gain) ***that is the answer but where did $569,000 (basis) come from?