Question

On December 31, after receipt of his share of partnership income, Clark sold his interest in a limited partnership for $30,000 cash and relief of all liabilities. On that date, the adjusted basis of Clark's partnership interest was $40,000, consisting of his capital account of $15,000 and his share of the partnership liabilities of $25,000. The partnership has no unrealized receivables or substantially appreciated inventory. What is Clark's gain or loss on the sale of his partnership interest

Answer 1

Answer:

$15,000

Explanation:

Calculation to determine Clark's gain or loss on the sale of his partnership interest

First step is calculate The amount realized

Using this formula

Amount realized = ( Cash received + Relief of debt)

Let plug in the formula

Amount realized=$30,000+$25,000

Amount realized=$55,000

Now let determine Clark's gain or loss on the sale of his partnership interest using this formula

Capital gain=Amount realized-Partner's basis in the partnership

Let plug in the formula

Capital gain =$55,000 − $40,000

Capital gain =$15,000

Therefore Clark's gain or loss on the sale of his partnership interest is $15,000