RBP Partnership is a service oriented partnership that has three equal general partners. One of them, Barry, sells his interest to another partner, Dale, for $90,000 of cash and the assumption of Barry’s share of partnership liabilities. On the sale date, the partnership’s cash basis balance sheet is as follows. Assume that the capital accounts before the sale reflect the partners’ bases in their partnership interests, excluding liabilities. The payment exceeds the stated fair market value of the assets because of goodwill that is not recorded on the books.
|
|
Basis |
FMV |
|
Basis |
FMV |
|
Cash |
$120,000 |
120,000 |
Note payable |
$ 30,000 |
$ 30,000 |
|
Accounts receivable |
–0– |
90,000 |
Capital accounts |
|
|
|
Capital assets |
30,000 |
75,000 |
Barry |
40,000 |
85,000 |
|
|
|
|
David |
40,000 |
85,000 |
|
|
|
|
Dale |
40,000 |
85,000 |
|
|
|
|
Total |
$150,000 |
$285,000 |
|
Total |
$150,000 |
$285,000 |
|
|
|
a. What is the total amount realized by Barry on the sale?
b. How much, if any, ordinary income must Barry recognize on the sale?
c. How much capital gain must Barry report?
d. What is Dale’s basis in the partnership interest acquired?