R exchanged a proprietorship parking lot ($23,000 market value and $15,000 basis) for a 10 percent capital interest in a partnership.The partnership uses the property for four years and then sells it for $25,000.R must recognize income from the sale of

Question

Quizplus · Accepted Answer

When R exchanged the property, they did not recognize any gain or loss because it was a like-kind exchange. However, when the partnership sells the property for $25,000, R must recognize gain based on the proportionate share of the partnership's gain allocated to them.

First, we need to determine the partnership's gain on the sale of the property:

Sales price: $25,000 
Basis: $15,000 
Gain: $10,000

Since R owns a 10% capital interest in the partnership, they are allocated 10% of the gain:

10% of $10,000 = $1,000

Therefore, the correct answer is B) $8,200.

R Exchanged a Proprietorship Parking Lot ($23,000 Market Value and $15,000