Author Question: On July 1, Joseph, a 10% owner, sells his interest in ABC Partnership to Andy, an outsider, for ... (Read 31 times)

Marty · **on:** Sep 13, 2020

Question 1

On July 1, Alexandra contributes business equipment (which she had purchased two years ago) having a $45,000 FMV and a $40,000 adjusted basis to the AX Partnership in exchange for a 25% interest in the capital and profits. The basis of Alexandra's partnership interest is
◦ $5,000.
◦ $40,000.
◦ $45,000.
◦ None of these.

Question 2

On July 1, Joseph, a 10% owner, sells his interest in ABC Partnership to Andy, an outsider, for $165,000 cash and the release from $20,000 of partnership liabilities. Joseph's partnership interest at the beginning of the year was $120,000. The partnership earned income through June 30 of $100,000. Joseph's share of partnership liabilities increased by $5,000 from January 1 to June 30. What are the tax consequences to Joseph on the sale of his partnership interest (assume the partnership does not hold any inventory or unrealized receivables)?
◦ $45,000 capital gain
◦ $50,000 capital gain
◦ $55,000 capital gain
◦ $65,000 capital gain

brittrenee · **Reply #1 on:** Sep 13, 2020

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