Lars Has a Basis in His Partnership Interest in XXL

question 2140

Multiple Choice

Lars has a basis in his partnership interest in XXL of $100,000. He sells the partnership interest in XXL for $160,000. XXL is a cash- basis partnership which has accounts receivable with a $30,000 fair market value and a zero adjusted basis. Lars's share of these receivables is $10,000. What is the amount and character of the gain that Lars recognizes on the sale of his partnership interest?

• A) $10,000 ordinary income and $50,000 capital gain
• B) $10,000 ordinary income and $60,000 capital gain
• C) $60,000 capital gain
• D) $50,000 capital gain

---

Definitions:

Perfectly Competitive Market

A market structure characterized by many buyers and sellers, identical products, and no barriers to entry or exit, leading to efficient price determination.

Short Run

A period in which at least one factor of production is fixed and cannot be changed.

Purely Competitive Industry

A market structure characterized by many small firms producing identical products, with no single firm able to influence market prices.