Barney,Bob,and Billie Are Equal Partners in the BBB Partnership

question 73

Multiple Choice

Barney,Bob,and Billie are equal partners in the BBB Partnership.The partnership balance sheet reads as follows on December 31 of the current year:

Partner Billie has an adjusted basis of $40,000 for her partnership interest.If Billie sells her entire partnership interest to new partner Janet for $60,000 cash,how much capital gain and ordinary income must Billie recognize from the sale?

• A)$20,000 ordinary income.
• B)$20,000 capital gain.
• C)$10,000 ordinary income;$10,000 capital gain.
• D)$30,000 ordinary income;$10,000 capital loss.
• E)None of the above.

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Definitions:

Total Revenue

The sum of all revenue collected from selling goods or services before deducting any costs.

Marginal Cost

The monetary requirement for the generation of one additional unit of a good or service.

Average Total Cost

The total cost of production (fixed plus variable costs) divided by the total quantity of output produced. It measures the cost per unit of output.

Ceteris Paribus

a Latin phrase meaning "all other things being equal," used in economic models to isolate the effect of one variable.