Nick Sells His 25% Interest in the LMNO Partnership to New

question 110

True/False

Nick sells his 25% interest in the LMNO Partnership to new partner Katrina for $57,500.The partnership's assets consist of cash ($100,000), land (basis of $90,000, fair market value of $70,000), and inventory (basis of $40,000, fair market value of $60,000).Nick's basis in his partnership interest was $57,500.On the sale, Nick will recognize ordinary income of $5,000 and a capital loss of $5,000.

---

Definitions:

Quantum Meruit

is a Latin term meaning "as much as he has earned," used in legal contexts to describe the entitlement to be paid for services rendered or work done when no contract exists or where a contract exists but cannot be enforced.

Court-Created Damages

Damages awarded by a court as a remedy in a lawsuit, often in cases where traditional damages are insufficient to resolve the harm done.

Donee Beneficiary

A third party who provides no consideration for the benefits received and who owes the contracting parties no legal duty.

Consideration

A crucial element in contract law that refers to something of value exchanged between parties, forming the basis for a contract's validity.