At the end of last year, Cynthia, a 20percent partner in the five-person CYG partnership, has an outside basis of $30,000, including her $15,000 share of CYG debt. On January 1 of the current year, Cynthia sells her partnership interest to Roger for a cash payment of $22,500 and the assumption of her share of CYG's debt. CYG has no hot assets. What is the amount and character of Cynthia's recognized gain or loss on the sale?
A)$7,500 capital loss.
B)$7,500 ordinary loss.
C)$7,500 capital gain.
D)$7,500 ordinary income.

Question

Quizplus · Accepted Answer

Cynthia's recognized gain is calculated by subtracting her outside basis ($30,000) from the sum of the cash received ($22,500) and the relief of debt ($15,000), which equals $37,500. The difference, $7,500, is a capital gain because the sale of a partnership interest is treated as the sale of a capital asset.

At the End of Last Year, Cynthia, a 20percent Partner