Jessica is a 25% partner in the JRL Partnership. On January 1, JRL distributes $40,000 cash to Jessica. JRL has no hot assets or liabilities at the date of the distribution. Jessica's basis in her JRL partnership interest is $28,000. What is the amount and character of Jessica's gain or loss from the distribution?

Question

Business

Frankie Fritz

16 April, 13:28

Jessica is a 25% partner in the JRL Partnership. On January 1, JRL distributes $40,000 cash to Jessica. JRL has no hot assets or liabilities at the date of the distribution. Jessica's basis in her JRL partnership interest is $28,000. What is the amount and character of Jessica's gain or loss from the distribution?

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Answers (1)

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Mareli Haas · Answer 1

Answer: $12,000

Explanation:

Given that,

Jessica is a 25% partner in the JRL Partnership

Cash received = $40,000

Jessica's partnership interest (basis) = $28,000

JRL has no hot assets or liabilities

Capital Gain on Distribution = Total Amount Received - Basis in Firm + Liability in Partnership

= $40,000 - $28,000 + $0

= $12,000

Therefore, $12,000 is the amount and character of Jessica's gain from the distribution.