Jessica is a 25percent partner in the JRL Partnership. On January 1, JRL distributes $40,000 cash to Jessica. JRL has no hot assets or liabilities at the date of the distribution. Jessica's basis in her JRL partnership interest is $28,000. What is the amount and character of Jessica's gain or loss from the distribution?
A)$0.
B)$12,000 ordinary income.
C)$12,000 capital loss.
D)$12,000 capital gain.

Question

Quizplus · Accepted Answer

Jessica's gain from the distribution is calculated based on the difference between the cash received ($40,000) and her basis in the partnership interest ($28,000), resulting in a $12,000 gain. Since the distribution does not involve hot assets and is a return of capital, the gain is treated as a capital gain.

Jessica Is a 25percent Partner in the JRL Partnership