At the End of Last Year, Cynthia, a 20percent Partner

question 1

Multiple Choice

At the end of last year, Cynthia, a 20percent partner in the five-person CYG partnership, has an outside basis of $23,000, including her $8,500 share of CYG debt. On January 1 of the current year, Cynthia sells her partnership interest to Roger for a cash payment of $16,000 and the assumption of her share of CYG's debt. CYG has no hot assets. What is the amount and character of Cynthia's recognized gain or loss on the sale?

• A) $7,000 capital loss.
• B) $7,000 ordinary loss.
• C) $1,500 capital gain.
• D) $7,500 ordinary income.

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