Steve Sells His 20% Partnership Interest Having a $28,000 Basis

question 51

Multiple Choice

Steve sells his 20% partnership interest having a $28,000 basis to Nancy for $40,000 cash. At the time of the sale, the partnership has no liabilities and its assets are as follows: The receivables and inventory are Sec. 751 assets. There is no agreement concerning the allocation of the sales price. Steve must recognize

• A) no gain or loss.
• B) $12,000 ordinary income.
• C) $12,000 capital gain.
• D) $14,000 ordinary income and $2,000 capital loss.

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Definitions:

Tone

In literature, the attitude of a writer toward the subject or audience; in music, a specific pitch or quality of sound.

Information-Processing Model

A cognitive approach comparing the human mind to a computer, focusing on how information is taken in, processed, stored, and retrieved.

Sensory Memory

The shortest-term element of memory that allows individuals to retain impressions of sensory information after the original stimulus has ceased.

Long-Term Memory

A type of memory responsible for the storage of information over an extended period, ranging from a few days to decades.