Reference no: EM132781333

The following assets are recorded on SYZ partnership's books as follows:

Inventory- basis to the partnership $12,000, FMV $28,000

Land- basis to the partnership $20,000, FMV $42,000

Equipment (not Realty) Original Cost $70,000, adjusted basis $60,000 due to $10,000 in MACRS accelerated depreciation; FMV $70,000

Total partner's capital accounts- at basis $92,000, at FMV $140,000

Sylvie was a 50% partner in SYZ until she sold her entire interest in the partnership for $70,000 cash when her outside basis in her partnership interest was $50,000.

Problem 1: How should Sylvie's total $20,000 gain on the sale of her partnership interest be characterized for tax purpose?

A. ALL ordinary income

B. ALL capital gain

C. $8,000 ordinary gain & $12,000 capital gain

D. $13,000 ordinary gain & $7,000 capital gain

E. $24,000 ordinary gain & $4,000 capital gain