Allison, Keesha, and Steven each owns an equal interest in KAS Partnership, a calendar-year-end, cash-method entity. On January 1 of the current year, Steven’s basis in his partnership interest is $27,500. During January and February, the partnership generates $30,660 of ordinary income and $4,656 of tax-exempt income. On March 1, Steven sells his partnership interest to Juan for a cash payment of $46,100. The partnership has the following assets and no liabilities at the sale date: Tax Basis FMV Cash $ 31,000 $ 31,000 Land held for investment 31,000 62,000 Totals $ 62,000 $ 93,000 Problem 16-32 Part a (Algo)
a. Assuming KAS’s operating agreement provides for an interim closing of the books when partners’ interests change during the year, what is Steven’s basis in his partnership interest on March 1 just prior to the sale?
| Basis | $ |
b. What are the amount and character of
Steven’s recognized gain or loss on the sale?
multiple choice
Neither gain nor loss recognized
$6,828 of ordinary income
$18,984 of ordinary income
$6,828 of capital gain
$18,984 of capital gain
c. What is Juan’s initial basis in the partnership interest?
| Basis | $ |
d. What is the partnership’s basis in the
assets following the sale?
| Basis | $ |