On July 1,Joseph,a 10% Owner,sells His Interest in ABC Partnership

question 36

Multiple Choice

On July 1,Joseph,a 10% owner,sells his interest in ABC Partnership to Andy,an outsider,for $165,000 cash and the release from $20,000 of partnership liabilities.Joseph's partnership interest at the beginning of the year was $120,000.The partnership earned income through June 30 of $100,000.Joseph's share of partnership liabilities increased by $5,000 from January 1 to June 30.What are the tax consequences to Joseph on the sale of his partnership interest (assume the partnership does not hold any inventory or unrealized receivables) ?

• A)$45,000 capital gain
• B)$50,000 capital gain
• C)$55,000 capital gain
• D)$65,000 capital gain

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Definitions:

Jamestown, Virginia

The first permanent English settlement in North America, founded in 1607, serving as the capital of the Colony of Virginia for several decades.

New France

New France was the area colonized by France in North America from the 16th to the 18th century, encompassing parts of what are now Canada, the United States, and the Caribbean.

French Huguenots

Members of the Protestant Reformed Church of France during the 16th and 17th centuries who faced severe persecution for their faith.

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Indentured servants were individuals who contracted to work for a specific period, typically four to seven years, in exchange for passage to the New World, food, and lodging, prevalent in colonial America.