Question

Mindy sold her interest in a partnership for $20,000 cash when her outside basis was $5,000. She was relieved of her $25,000 share of partnership liabilities. What is Mindy's recognized gain or loss from the sale of her partnership interest? A. $15,000 B. $20,000 C. $40,000 D. $45,000

Answer 1

Answer:

gain from partnership interest is $40000

so correct option is C. $40,000

Explanation:

given data

interest = $20,000

basis = $5,000

liabilities = $25,000

to find out

recognized gain or loss from the sale of her partnership interest

solution

we recognized gain or loss here as

recognized gain or loss = interest  + liabilities - basis   ..................1

put here value we get

recognized gain or loss = $20,000 + $25,000 - $5,000

recognized gain or loss = $40,000

so gain from partnership interest is $40000

so correct option is C. $40,000