Jerilyn is a 30% partner in the APJ Partnership when she sells her entire interest to Melly for $92,000 cash. At the time of the sale, Jerilyn's basis in APJ is $75,000. APJ does not have any debt or hot assets. What is Jerilyn's gain or loss on the sale of her interest?

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Cha Cha

Business

26 July, 16:46

Jerilyn is a 30% partner in the APJ Partnership when she sells her entire interest to Melly for $92,000 cash. At the time of the sale, Jerilyn's basis in APJ is $75,000. APJ does not have any debt or hot assets. What is Jerilyn's gain or loss on the sale of her interest?

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Imani Owens · Answer 1

Jerilyn will have a gain of $17,000 from sale of her interest

Explanation:

Jerilyn will recognize a gain on the sale of her interest and the gain amount would be $17,000 which is computed from the difference among her basis in APJ of $75,000 and sells her interest for $92,000 ($92,000 - $75,000).

She recognizes the gain as she receives the only cash for selling her interest and the amount is more than her basis in her partnership interest and also APJ has no hot assets, therefore, the gain will be recognized as capital.