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

question 34

Multiple Choice

At the end of last year, Cynthia, a 20% partner in the five-person CYG partnership, has an outside basis of $30,000 including her $15,000 share of CYG debt. On January 1 of the current year, Cynthia sells her partnership interest to Roger for a cash payment of $22,500 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) $7,500 capital loss.
• B) $7,500 ordinary loss.
• C) $7,500 capital gain.
• D) $7,500 ordinary income.