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

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Definitions:

Cost of Labor

The total amount spent by employers to compensate employees, including wages, benefits, and any other costs associated with employment.

Serve The Same Customers

The practice of targeting and catering to the same client base by different businesses or services.

FLSA

The Fair Labor Standards Act, a U.S. law that establishes minimum wage, overtime pay eligibility, recordkeeping, and child labor standards.

Nonexempt Employee

An employee who is covered by the Fair Labor Standards Act (FLSA) and is eligible for overtime pay for hours worked beyond a standard workweek.