The Crimson Partnership is a service-providing consulting firm, and Jana is a 20% general partner with a $100,000 basis in her partnership interest. Crimson's assets consist of unrealized receivables basis of $0, fair market value of
$400,000), cash of $300,000, and land basis of $200,000, fair market value of $300,000). If Crimson distributes
$200,000 of cash to Jana in liquidation of her interest in the partnership and Crimson does not liquidate), Jana will recognize ordinary income of $80,000 and a capital gain of $20,000.

Question

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Jana's basis in her partnership interest is $100,000. She receives $200,000 in cash in liquidation of her interest. The excess of the amount received over her basis is $100,000. This amount is recognized as ordinary income. The partnership's assets consist of unrealized receivables with a basis of $0 and a fair market value of $400,000, cash of $300,000, and land with a basis of $200,000 and a fair market value of $300,000. The partnership does not liquidate. Therefore, Jana's capital gain is $20,000.

The Crimson Partnership Is a Service-Providing Consulting Firm, and Jana