Sweeney originally contributed $286,000 in cash for a one-fourth interest in the Gilbert LLC. During the several years that Sweeney was a member of the LLC, his share of the LLC's income was $171,600 and he withdrew $114,400 cash. The LLC's liabilities are $143,000, of which Sweeney's share is $35,750. The LLC has $71,500 of hot assets, of which Sweeney's share is $17,875. Sweeney sells his LLC interest to Jana for $377,520 cash, with Jana also assuming Sweeney's share of the LLC's liabilities.

How much is Sweeney's gain on the sale, and what is its character?

Sweeney's total gain on the sale is $ , of which $ recognized as ordinary income, with the remaining $ recognized as a long-term capital gain.

How much is Jana's adjusted basis for her LLC interest?

A partner can sell or exchange all or part of a partnership interest. The transaction can be between the partner and a third party; in this case, it is similar in concept to a sale of corporate stock. Or the transaction can be between the partner and the partnership, in which case it is similar in concept to a redemption of corporate stock by the entity.