At the Beginning of Year 1, Paulina Purchased a 25

question 78

Multiple Choice

At the beginning of year 1, Paulina purchased a 25% general partner interest in Gamma Partnership for $25,000. Paulina's partnership Schedule K-1 for year 1 reported that her share of Gamma's debt at year-end was $10,000 and her share of ordinary loss was $5,000. On January 1, year 2, Paulina sold her interest to another partner for $22,000 cash (including relief of liabilities) . Compute Paulina's gain or loss on the sale of her partnership interest.

• A) $3,000 loss
• B) $8,000 loss
• C) $2,000 gain
• D) $0 gain or loss

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Definitions:

Federal Reserve Board

The governing body of the Federal Reserve System, responsible for overseeing U.S. monetary policy and financial institutions.

Congress

The national legislative body of a country, particularly in the United States, consisting of two houses: the Senate and the House of Representatives.

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The interest rate at which depository institutions lend reserve balances to other depository institutions overnight, on an uncollateralized basis.

Short-Term Loans

Loans that are scheduled to be repaid in less than a year.