Surina sells her 25% partnership interest to Katie for $50,000 on July 1 of the current tax year.Surina's basis in her partnership interest at the beginning of the year was $40,000,including a $15,000 share of partnership liabilities.The partnership's income for the entire year was $100,000,and Surina's share of partnership debt was $10,000 as of the date she sold the partnership interest.Assume the partnership has no hot assets and that its income is earned evenly throughout the year.Surina recognizes a gain of $2,500 on the sale.

Question

Quizplus · Accepted Answer

To calculate Surina's gain or loss on the sale of her partnership interest, we need to determine the amount realized and the adjusted basis.

Amount realized = $50,000
Adjusted basis = $40,000 + ($15,000 - $10,000) = $45,000

Therefore, Surina's gain is $50,000 - $45,000 = $5,000. Since Surina recognizes a gain of $2,500 on the sale, the answer is A: True.

Surina Sells Her 25% Partnership Interest to Katie for $50,000