Fundamentals of Taxation 2011 4th Edition by Ana Cruz, Debra Prendergast, Dan Schisler, Michael Deschamps

Exercise 31

On November 1, Ashton sells her interest in XYZ partnership to Wayne for $200,000 cash and a release of liability of $30,000. Ashton's basis at the beginning of the year was $125,000 (including the $30,000 of liability). Ashton's share of income through November 1 was $45,000, and she received a $15,000 cash distribution earlier in the year. What are the tax consequences to Ashton on the sale of her partnership interest? a. $0 tax effect.
B) $45,000 capital gain.
C) $75,000 capital gain.
D) $105,000 capital gain.