Jackson is a 30% partner in the JJM Partnership when he sells his entire interest to Rhonda for $112,000 cash. At the time of the sale, Jackson's basis in JJM is $64,000. JJM does not have any debt or hot assets. What is Jackson's gain or loss on the sale of his interest?

Question

Quizplus · Accepted Answer

Jackson's gain on the sale is computed as follows: 
Amount realized ($112,000) - Basis in interest ($64,000) = Gain ($48,000). Since JJM does not have any hot assets, Jackson's gain will be a capital gain.

Jackson Is a 30% Partner in the JJM Partnership When