At the end of last year, Isabella, a 20 percent partner in the five-person JDT partnership, has an outside basis of $30,000, including her $15,000 share of JDT debt. On January 1 of the current year, Isabella sells her partnership interest to Roger for a cash payment of $22,500 and the assumption of her share of JDT's debt. JDT has no hot assets. What is the amount and character of Isabella's recognized gain or loss on the sale?

Question

Serena Brown

Business

21 September, 01:53

At the end of last year, Isabella, a 20 percent partner in the five-person JDT partnership, has an outside basis of $30,000, including her $15,000 share of JDT debt. On January 1 of the current year, Isabella sells her partnership interest to Roger for a cash payment of $22,500 and the assumption of her share of JDT's debt. JDT has no hot assets. What is the amount and character of Isabella's recognized gain or loss on the sale?

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Answers (1)

Know the Answer?

Gillian Cherry · Answer 1

Isabella gain = $7,500

Explanation:

given data

partnership = 20 %

Outside basis = $30,000

share of JDT debt liability = $15,000

Selling value = $22,500

solution

first we get here Net value of share that is express as

Net value of share = Value of share - Liabilities ... 1

put here value and we will get

Net value of share = $30,000 - $15,000

Net value of share = $15,000

and

Isabella gain = Selling value - Net value of share ... 2

Isabella gain = $22,500 - $15,000

Isabella gain = $7,500