Question
SEJ is an equal three person partnership in which S, E, and J each have an outside basis of $300. The partnership uses the accrual
SEJ is an equal three person partnership in which S, E, and J each have an outside basis of $300. The partnership uses the accrual method of accounting. On January 1 of the current year, J sold her interest to X for $750. The partnership has the following assets and no liabilities.
The machinery was purchased for $150; therefore, the entire $75 gain would be depreciation recapture under section 1245. The building was purchased several years ago for $600 therefore $300 of the $450 gain would be section 1250 capital gain. The stock was purchased by the partnership 10 months ago.
Required
- Calculate Js overall gain on the sale of her partnership interest.
- Identify the Partnerships section 751 assets.
- Calculate the gain that would be allocated to J in a hypothetical sale of its 751 assets.
- Calculate Js gain broken down between ordinary income and capital gain.
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