At the end of last year, Cynthia, a 20 percent partner in the five-person CYG partnership, has an outside basis of $24,500, including her $10,000 share of CYG debt. On January 1 of the current year, Cynthia sells her partnership interest to Roger for a cash payment of $17,500 and the assumption of her share of CYG's debt. CYG has no hot assets. What is the amount and character of Cynthia's recognized gain or loss on the sale

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Business

Killian

7 July, 06:38

At the end of last year, Cynthia, a 20 percent partner in the five-person CYG partnership, has an outside basis of $24,500, including her $10,000 share of CYG debt. On January 1 of the current year, Cynthia sells her partnership interest to Roger for a cash payment of $17,500 and the assumption of her share of CYG's debt. CYG has no hot assets. What is the amount and character of Cynthia's recognized gain or loss on the sale

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Andrew Boyer · Answer 1

Answer and Explanation:

The computation of amount and character of Cynthia's recognized gain or loss on the sale is shown below:-

Cynthia's income will be the difference between the $27,500 realized sum and her $24,500 outside the base for an $3,000 income. The income is capital because CYG does not have any hot assets.

Working note:-

Realized amount = Cash + Debt relief

= $17,500 + $10,000

= $27,500