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?