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Accounting - Taxation for sale of partnership interest

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Roberta Wynn has been a partner in the Cato partnership for a number of years. With the
permission of the other partners, she sells her partnership interest to a third party. At the
time of sale, her basis in her partnership is only $100. For the portion of the year to the
date of sale, she is allocated a partnership loss of $2,100. If she receives $10,000 for her
partnership interest, what are the tax consequences of the sale and the results of
partnership operations in her final year?

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Solution Summary

The solution explains the three separate transactions involved with the sale of her interest. The entries include an explanation for the loss on operations, the sale of her interest and the release of the basis limitation.

Solution Preview

There are three reportable transactions in this scenario. First is to report the result of operations. Roberta can report the $2100 loss, but she will be limited to her basis of $100. The remaining $2000 ...

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