Question

A customer owns a real estate limited partnership interest, with an adjusted cost basis of $25,000. This interest has generated unused passive losses totaling $15,000. The partnership interest is sold for $25,000. Regarding the cost basis and capital gain or loss which of the following statements are true?I The adjusted cost basis is $10,000II The adjusted cost basis is $40,000III The customer has a capital gain of $10,000IV The customer has a capital loss of $15,000A. I and IIIB. I and IVC. II and IIID. II and IV

Answer 1

Answer: D. II and IV

Adjusted cost basis is $40,000

Customer has a capital loss of $15,000

Explanation:

Given the following :

basis of partnership = $25,000

Total unused passive loss = $15,000

Amount generated (sales proceed) from sale of partnership interest = $25,000

The adjusted cost basis :

Basis of partnership + unused passive losses

$25,000 + $15,000 = $40,000

Sales proceed accrued from sale of the property = $25,000.

Since adjusted cost basis is greater than proceed generated from sale, then we have a capital loss

$40,000 - $25,000 = $15,000 capital loss