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On December 31, Kate Sells Her 20% Interest (With a Basis

Question 82

Essay

On December 31, Kate sells her 20% interest (with a basis of $18,000 which, of course, includes a share of partnership liabilities) in the KLM Partnership to Karl for $27,000 cash plus assumption of her $6,000 share of liabilities. On that date, the partnership has the following balance sheet: On December 31, Kate sells her 20% interest (with a basis of $18,000 which, of course, includes a share of partnership liabilities) in the KLM Partnership to Karl for $27,000 cash plus assumption of her $6,000 share of liabilities. On that date, the partnership has the following balance sheet: What are the amount and character of the gain that Kate must recognize on the sale?
What are the amount and character of the gain that Kate must recognize on the sale?

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