Reference no: EM132594032

Sale of Partnership Interest and Termination. Clay owned 60% of the CAP Partnership and sold one-half of his interest (30%) to Steve for $75,000 cash. Before the sale, Clay's basis in his entire partnership interest was $168,000 including his $30,000 share of partnership liabilities and his share of income up to the sale date.

Partnership assets on the sale date were

Assets                      Partnership's                Basis FMV

Cash                       $ 50,000                     $ 50,000

Inventory                  30,000                         60,000

Land                         200,000                      190,000

Total                         $280,000                    $300,000

Question a. What are the amount and character of Clay's recognized gain or loss on the sale? What is his remaining basis in his partnership interest?

Question b. What is Steve's basis in his partnership interest?

Question c. How will the partnership's basis in its assets be affected?

Question d. How would your answers to Parts a and c change if Clay sold his entire interest to Steve for $150,000 cash?