Agreement concerning the allocation of sales price

Reference no: EM13131966

Steve sells his 20% partnership interest having a $28,000 basis to Nancy for $40,000 cash. At the time of the sale, the partnership has no liabilities and its assets are as follows.

Cash Basis $20,000 FMV $20,000
Unrealized receivables Basis $0 FMV $40,000
Inventory Basis $10,000 FMV $40,000
Land (Sec. 1231) Basis $110,000 FMV $100,000

The receivables and inventory are Sec. 751 assets. There is no agreement concerning the allocation of the sales price. Steve must recognize

a. no gain or loss
b. $12,000 ordinary income
c.$12,000 capital gain
d. $14,000 ordinary income and $2,000 capital loss

Reference no: EM13131966

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