Calvin sells his 40 percent interest in a partnership with a $70,000 basis for $75,000. The partnership has two assets, inventory valued at $100,000 with a $50,000 basis and investments valued at $87,500 that have a basis of $125,000. How will Calvin report the sale of the partnership interest?
A) $5,000 capital loss
B) $20,000 ordinary income
C) $20,000 ordinary income; $15,000 capital loss
D) $5,000 capital gain

Question

Quizplus · Accepted Answer

.4($100,000 - $50,000) = $20,000 ordinary income; .4($87,500 - $125,000) = $15,000 capital loss

Calvin Sells His 40 Percent Interest in a Partnership with a $70,000