Items 1 and 2 are based on the following data:
The partnership of Hager, Mazer & Slagle had the following cash-basis balance sheet at December 31, 2006:
|
Adjusted basis per books |
Fair market value |
||
|
Assets |
|||
|
Cash |
$51,000 |
$ 51,000 |
|
|
Accounts receivable |
— |
210,000 |
|
|
Totals |
$51,000 |
$261,000 |
|
|
Liabilities and Capital |
|||
|
Note payable |
$30,000 |
$ 30,000 |
|
|
Capital accounts: |
|||
|
Hager |
7,000 |
77,000 |
|
|
Mazer |
7,000 |
77,000 |
|
|
Slagle |
7,000 |
77,000 |
|
|
Totals |
$51,000 |
$261,000 |
|
Slagle, an equal partner, sold his partnership interest to Burns, an outsider, for $77,000 cash on January 1, 2007. In addition, Burns assumed Slagle’s share of partnership liabilities.
What was the total amount realized by Slagle on the sale of his partnership interest?
- $67,000
- $70,000
- $77,000
- $87,000
How much ordinary income should Slagle report in his 2007 income tax return on the sale of his partnership interest?
- $0
- $10,000
- $70,000
- $77,000