Items 1 and 2 are based on the following:
The personal service partnership of Allen, Baker & Carr had the following cash basis balance sheet at December 31, 2006:
|
Assets |
Adjusted basis per books |
Market value |
|
|
Cash |
$102,000 |
$102,000 |
|
|
Unrealized accounts receivable |
— |
420,000 |
|
|
Totals |
$102,000 |
$522,000 |
|
|
Liability and Capital |
|||
|
Note payable |
$ 60,000 |
$ 60,000 |
|
|
Capital accounts: |
|||
|
Allen |
14,000 |
154,000 |
|
|
Baker |
14,000 |
154,000 |
|
|
Carr |
14,000 |
154,000 |
|
|
Totals |
$102,000 |
$522,000 |
|
Carr, an equal partner, sold his partnership interest to Dole, an outsider, for $154,000 cash on January 1, 2007. In addition, Dole assumed Carr’s share of the partnership’s liability.
What was the total amount realized by Carr on the sale of his partnership interest?
- $174,000
- $154,000
- $140,000
- $134,000
What amount of ordinary income should Carr report in his 2007 income tax return on the sale of his partnership interest?
- $0
- $ 20,000
- $ 34,000
- $140,000