Partnership Records Show R Is a 50 Percent Partner

question 12

Multiple Choice

Partnership records show: $\begin{array}{ll}&\text { Inside Basis }&FMV\\\text { Inventory }&\$12,000 & \$28,000 \\\text { Land }&48,000 & 70,000\\\text { Equipment }&32,000&42,000\\\text { Total assets }&\$92,000&\$140,000\end{array}$ R is a 50 percent partner.The equipment has $10,000 of § 1245 recapture potential.R sells her entire interest in the partnership for $70,000.Her basis in the partnership is $50,000.R's $20,000 recognized gain on the sale is

• A)All ordinary income
• B)All capital gain
• C)$8,000 of ordinary income and $12,000 of capital gain
• D)$13,000 of ordinary income and $7,000 of capital gain
• E)$24,000 of ordinary income and $4,000 of capital loss

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Definitions:

Racing Bike

A type of bicycle designed for competitive road cycling, characterized by its lightweight frame and components for speed.

Adequacy of Consideration

The fairness of the value exchanged in a contract, ensuring that what is given by each party is of comparable worth.

Legal

Pertains to the system of rules that are created and enforced through social or governmental institutions to regulate behavior.

Existing Duty

An obligation that a party is already legally bound to under the terms of a contract or by law.