Barry owns a 50 percent interest in B&B Interests, a partnership. His brother, Benny, owns a 35 percent interest in that same partnership, and the remaining 15 percent is owned by an unrelated individual. During the current year, Barry sells a rental property with a basis of $60,000 to B&B Interests for $100,000. The partnership intends to hold the rental as inventory for resale. What is the amount and nature of Barry's gain or loss on this transaction?

Question

Quizplus · Accepted Answer

Since the transaction involves the sale of a rental property to be held as inventory for resale, it is considered ordinary income. Barry's gain is calculated by subtracting his basis of $60,000 from the sale price of $100,000, resulting in a gain of $40,000. Therefore, the correct answer is D) $40,000 ordinary income.

Barry Owns a 50 Percent Interest in B&B Interests, a Partnership