Midway Through the Current Tax Year, Georgie Sells Her 40

Midway through the current tax year, Georgie sells her 40% interest in the GHI Partnership to new partner Kelly for
$150,000, including Georgie's share of partnership liabilities. At the beginning of the tax year, Georgie's basis in her partnership interest was $40,000 (excluding her share of partnership debt). The partnership reported income of
$120,000 for the year, and Georgie's share of partnership debt was $50,000 at the sale date. (Assume that the partnership uses a monthly proration of income.) On the sale date, the partnership's assets consist of cash ($195,000), land (basis of $90,000, fair market value of $120,000), and unrealized receivables (basis of $0, fair
market value of $60,000). Georgie will recognize ordinary income of $24,000 and a capital gain of $12,000, for a total of $36,000 on the sale.