How much and what type of income or loss must nicole report

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Reference no: EM131793102

Problem - On 31 December 2010, Nicole sold her 20% interest in the T3 general partnership to Mabel and received a cash payment of $250,000 from the sale.

The partnership=s trial balance immediately before the 12/31/2010 sale is shown below with market values included.

 

Debit (Credit) Cost Basis

Debit (Credit) Market Value

Cash

50,000

50,000

Accounts receivable

70,000

70,000

Inventory

60,000

260,000

Business furniture costing $90,000 shown net of $50,000 of accumulated depreciation

40,000

70,000

Capital assets

130,000

1,150,000

Loan due to Wells Fargo Bank

(400,000)

(400,000)

George, Capital (80% interest)

80,000

(960,000)

Nicole, Capital (20%)

20,000

(240,000)

Ordinary income for 2010

(50,000)

N/A

Trial balance totals

-0-

-0-

REQUIRED:

A. How much and what type of income and/or loss must Nicole report in 2010 from all transactions involving the partnership?

B. What is Mabel's basis in the partnership immediately after her purchase of Nicole partnership interest?

Reference no: EM131793102

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