Jackson is a 30percent partner in the JJM Partnership when he sells his entire interest to Rhonda for $112,000 cash. At the time of the sale, Jackson's basis in JJM is $64,000. JJM does not have any debt or hot assets. What is Jackson's gain or loss on the sale of his interest?
A)$48,000 capital gain.
B)$48,000 ordinary income.
C)$24,000 capital gain and $24,000 ordinary income.
D)Gain or loss cannot be determined.

Question

Quizplus · Accepted Answer

Jackson's gain on the sale of his partnership interest is calculated by subtracting his basis in the partnership ($64,000) from the amount he received for the sale ($112,000), which equals $48,000. Since the partnership does not have any hot assets (assets that would generate ordinary income if sold), the entire gain is treated as a capital gain.

Jackson Is a 30percent Partner in the JJM Partnership When