Lars Has a Basis in His Partnership Interest in XXL

question 108

Multiple Choice

Lars has a basis in his partnership interest in XXL of $100,000.He sells the partnership interest in XXL for $160,000.XXL is a cash-basis partnership which has accounts receivable with a $30,000 fair market value and a zero adjusted basis.Lars's share of these receivables is $10,000.What is the amount and character of the gain that Lars recognizes on the sale of his partnership interest?

• A)$50,000 capital gain
• B)$60,000 capital gain
• C)$10,000 ordinary income and $50,000 capital gain
• D)$10,000 ordinary income and $60,000 capital gain

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Definitions:

Nonconforming Goods

Products delivered under a contract that fail to meet the specifications or quality standards agreed upon.

Rights and Duties

The legal responsibilities (duties) and entitlements (rights) that are inherent in social and legal norms, contracts, or regulatory frameworks.

Possession

The state or fact of owning, controlling, or having something in one’s own keeping.

Incidental Damages

These are secondary expenses or losses incurred due to a breach of contract, such as storage or transportation costs.