Kumar's interest in the equal Moss Partnership is sold to Charles for $100,000 cash. On the date of the sale, the partnership tax balance sheet and the agreed fair market values were as follows.
Adjusted Basis FMV
Cash 180,000 1800,000
Inventory 200,000 100,000
Other assets 100,000 120,000
$480,000 $400,000
Kumar, capital $ 120,000 $100,000
Patterson, capital 120,000 100,000
Keegan, capital 120,000 100,000
Benedict, capital 120,000 100,000
$480,000 $400,000
Assume Kumar's basis for his partnership interest equals his capital account. As a result of the sale, Kumar recognizes
a. No gain or loss.
b. $20,000 capital loss.
c. $25,000 ordinary loss.
d. $20,000 capital gain.
e. $25,000 ordinary loss and $5,000 capital gain.