Problem - On 31 December 2010, Nicole sold her 20% interest in the T3 general partnership to Mabel and received a cash payment of $250,000 from the sale.
The partnership=s trial balance immediately before the 12/31/2010 sale is shown below with market values included.
|
|
Debit (Credit) Cost Basis
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Debit (Credit) Market Value
|
|
Cash
|
50,000
|
50,000
|
|
Accounts receivable
|
70,000
|
70,000
|
|
Inventory
|
60,000
|
260,000
|
|
Business furniture costing $90,000 shown net of $50,000 of accumulated depreciation
|
40,000
|
70,000
|
|
Capital assets
|
130,000
|
1,150,000
|
|
Loan due to Wells Fargo Bank
|
(400,000)
|
(400,000)
|
|
George, Capital (80% interest)
|
80,000
|
(960,000)
|
|
Nicole, Capital (20%)
|
20,000
|
(240,000)
|
|
Ordinary income for 2010
|
(50,000)
|
N/A
|
|
Trial balance totals
|
-0-
|
-0-
|
REQUIRED:
A. How much and what type of income and/or loss must Nicole report in 2010 from all transactions involving the partnership?
B. What is Mabel's basis in the partnership immediately after her purchase of Nicole partnership interest?