Maria owns a 60% interest in the KLM Partnership.Four years ago her father gave her a parcel of land.The gift basis of the land to Maria is $60,000.In the current year,Maria had still not figured out how to use the land for her own personal or business use; consequently,she sold the land to the partnership for $75,000.The partnership immediately started using the land as a parking lot for its employees.Maria recognizes a capital gain of $15,000 on the sale.

Question

Quizplus · Accepted Answer

Since Maria owns more than a 50% interest in the partnership's capital or profits and the land sold to the partnership is not a capital asset in its hands,any gain is an ordinary gain to Maria.Thus,she has ordinary income of $15,000 ($75,000 less $60,000).

Maria Owns a 60% Interest in the KLM Partnership