On April 1, 2019, George Hart, Jr. acquired a 25% interest in the Wilson, Hart, and Company partnership by gift from his father. The partnership interest had been acquired by a $50,000 cash investment by Hart, Sr. on July 1, 2013. The tax basis of Hart, Sr.'s partnership interest was $60,000 at the time of the gift. Hart, Jr. sold the 25% partnership interest for $85,000 on December 17, 2019. What type and amount of capital gain should Hart, Jr. report on his 2019 tax return?

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Business

Gunnar Cantu

7 June, 16:48

On April 1, 2019, George Hart, Jr. acquired a 25% interest in the Wilson, Hart, and Company partnership by gift from his father. The partnership interest had been acquired by a $50,000 cash investment by Hart, Sr. on July 1, 2013. The tax basis of Hart, Sr.'s partnership interest was $60,000 at the time of the gift. Hart, Jr. sold the 25% partnership interest for $85,000 on December 17, 2019. What type and amount of capital gain should Hart, Jr. report on his 2019 tax return?

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Kelvin Marquez · Answer 1

Long term capital gain of $25,000

Explanation:

Since the partnership interest was a gift from George's father, the holding period will include the time his father owned the partnership interest (from 2013 - 2019), so any gain will be a long term gain.

The basis for George's taxes will be the basis at the time he received the gift ($60,000), so his gain = $85,000 - $60,000 = $25,000