The SSC Partnership Balance Sheet Includes the Following Assets on December

question 15

Multiple Choice

The SSC Partnership balance sheet includes the following assets on December 31 of the current year:
Susan, a 1/3 partner, has an adjusted basis of $90,000 for her partnership interest. If Susan sells her entire partnership interest to Emma for $120,000 cash, how much capital gain and ordinary income must Susan recognize from the sale?

• A) $30,000 ordinary income.
• B) $30,000 capital gain.
• C) $10,000 ordinary income; $20,000 capital gain.
• D) $10,000 capital gain; $20,000 ordinary income.

---

Definitions:

Schachter and Singer

Psychologists known for their Two-Factor Theory of Emotion, proposing that emotion is based on physiological arousal and cognitive labeling of that arousal.

Two-factor Theory of Emotion

A psychological theory suggesting that an emotion is determined by a cognitive appraisal of a physiological arousal and the environmental context in which it occurs.

Arousing Injection

A hypothetical or experimental procedure aiming to increase physiological or emotional arousal through the administration of substances.

Confederate

A supposed participant in a research study who actually is working with the experimenters, unknown to the real participants.