Partner a Owns a 60% Interest in the Capital and Profits

question 45

Multiple Choice

Partner A owns a 60% interest in the capital and profits of the ABC Partnership.During the year A sells marketable securities to the partnership for their FMV of $30,000.The partnership intends to hold the securities as an investment.Based on these facts, which of the following is accurate?

• A)If A's basis in the securities was $25,000, A must recognize a $5,000 ordinary gain on the sale.
• B)If A's basis in the securities was $25,000, A recognizes no gain on the sale.
• C)If A's basis in the securities was $40,000, A may recognize a $10,000 capital loss on the sale.
• D)If A's basis in the securities was $40,000, A recognizes no loss on the sale.
• E)None of the above is accurate.

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Definitions:

Product Price

The amount of money charged for a good or service, determined by various factors including production costs, market demand, and competition.

Marginal Cost

The elevation in aggregate expenditure associated with creating an additional unit of a product or service.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, reflecting the total gains from undertaking an economic activity.

Marginal Revenue

The extra revenue earned by selling an additional unit of a product or service.