Marco, Jaclyn, and Carrie formed Daxing Partnership (a calendar-year-end entity) by contributing cash 10 years ago. Each partner owns an equal interest in the partnership. Marco, Jaclyn, and Carrie each have an outside basis in his/her partnership interest of $104,000. On January 1 of the current year, Marco sells his partnership interest to Ryan for a cash payment of $137,000. The partnership has the following assets and no liabilities as of the sale date: Tax Basis FMV
Cash $ 18,000 $ 18,000
Accounts receivable 0 12,000
Inventory 69,000 81,000
Equipment 180,000 225,000
Stock investment 45,000 75,000
Totals $ 312,000 $ 411,000
The equipment was purchased for $240,000, and the partnership has taken $60,000 of depreciation. The stock was purchased seven years ago
Required information
a. What are the hot assets $ 751(a)] for this sale?
i. Accounts receivable
ii. Inventory
iii. Stock investment
iv. Potential depreciation recapture in the equipment
b. What is Marcoâs gain or loss on the sale of his partnership interest?
c. What is the character of Marcoâs gain or loss?
i. $23,000 ordinary income and $10,000 capital gain
ii. $10,000 ordinary income and $23,000 capital gain
iii. $33,000 ordinary income
iv. $33,000 capital gain
v. None of these