Illustrate what is the amount and character of a gain

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Reference no: EM13121266

Q. A, B and C are the original members of ABC, a cash-method general partnership, with a fiscal year ending January 31. Each partner has a one-third interest in the capital, profits, and losses of ABC. Each originally contributed $10 to ABC for their partnership interests. The partnership balance sheet is as follows:

Asset Adjusted Basis Fair Market Value

1 $20 $20
2 $10 $25
3 $30 $45

Total $60 $90

Liabilities and Capital

Liabilities

Mortgage $30 $30

Capital

A $10 $20
B $10 $20
C $10 $20

On February 1, Year 1, D offers to purchase A’s interest in ABC for $20 cash. Assume that ABC has no Section 751(c) or 751(d) assets and ignore the accrual of interest on the partnership mortgage liability. If A accepts D’s offer, what is the amount and character of A’s gain or loss?

Reference no: EM13121266

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