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10 May, 11:56

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 her JRL partnership interest is $28,000. What is the amount and character of Jessica's gain or loss from the distribution?

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  1. 10 May, 12:12
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    Answer: $12,000

    Explanation:

    Given that,

    Jessica is a 25% partner in the JRL Partnership

    Cash received = $40,000

    Jessica's partnership interest (basis) = $28,000

    JRL has no hot assets or liabilities

    Capital Gain on Distribution = Total Amount Received - Basis in Firm + Liability in Partnership

    = $40,000 - $28,000 + $0

    = $12,000

    Therefore, $12,000 is the amount and character of Jessica's gain from the distribution.
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