Jessica is a 25% partner in the JRL Partnership.On January 1,JRL distributes $40,000 cash to Jessica.JRL has no hot assets or liabilities at the date of the distribution.Jessica's basis in JRL is $28,000.What is the amount and character of Jessica's gain or loss from the distribution?

Question

Quizplus · Accepted Answer

Jessica's gain is calculated as the cash received ($40,000) minus her basis in the partnership ($28,000), resulting in a $12,000 gain. Since this is a distribution in excess of her basis, it is treated as a capital gain.

Jessica Is a 25% Partner in the JRL Partnership