Steve Sells His 20% Partnership Interest Having a $28,000 Basis

question 88

Multiple Choice

Steve sells his 20% partnership interest having a $28,000 basis to Nancy for $40,000 cash.At the time of the sale,the partnership has no liabilities and its assets are as follows: The receivables and inventory are Sec.751 assets.There is no agreement concerning the allocation of the sales price.Steve must recognize

• A) no gain or loss.
• B) $12,000 ordinary income.
• C) $12,000 capital gain.
• D) $14,000 ordinary income and $2,000 capital loss.

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Definitions:

Perseverates

The repetition of a particular response (such as a word, phrase, or gesture) despite the absence or cessation of a stimulus.

Piaget

Jean Piaget, a Swiss psychologist known for his pioneering theory of cognitive development in children.

Object Permanence

The understanding that objects continue to exist even when they cannot be observed.

Direct Perception

The theory that the environment provides all necessary cues for perception, which can be directly grasped without additional cognitive processes.