The SSC Partnership balance sheet includes the following assets on December 31 of the current year: Susan, a 1/3 partner, has an adjusted basis of $90,000 for her partnership interest. If Susan sells her entire partnership interest to Emma for $120,000 cash, how much capital gain and ordinary income must Susan recognize from the sale?

Question

The SSC Partnership balance sheet includes the following assets on December 31 of the current year:  Susan, a 1/3 partner, has an adjusted basis of $90,000 for her partnership interest. If Susan sells her entire partnership interest to Emma for $120,000 cash, how much capital gain and ordinary income must Susan recognize from the sale?

Quizplus · Accepted Answer

$10,000 capital gain; $20,000 ordinary income: Susan's share of unrealized receivables is $20,000 ($60,000 unrealized receivables × 1/3 interest). Susan will recognize $20,000 of ordinary income and a $10,000 capital gain determined as the difference between the total gain of $30,000 and the ordinary income of $20,000.

The SSC Partnership Balance Sheet Includes the Following Assets on December