John owns a 20 percent interest in J&B Interests,a partnership.His brother,Brian,owns a 35 percent interest in that same partnership,and the remaining 45 percent is owned by an unrelated individual.During 2011,John sells a classic automobile from his personal collection with a basis of $80,000 to J&B Interests for $110,000.The partnership intends to hold the auto as part of its inventory for resale.What is the amount and nature of John's gain or loss on this transaction?

Question

Quizplus · Accepted Answer

John's gain on the sale of the automobile to the partnership is $30,000 ($110,000 - $80,000). Since the partnership intends to hold the automobile as inventory for resale, the gain is treated as ordinary income rather than a capital gain.

John Owns a 20 Percent Interest in J&B Interests,a Partnership