Question

Jessica is a 25% partner in the JRL Partnership. On January 1, JRL distributes $40,000 cash to Jessica. JRL has no hot assets or liabilities at the date of the distribution. Jessica's basis in her JRL partnership interest is $28,000. What is the amount and character of Jessica's gain or loss from the distribution?

Answer 1

Answer: $12,000

Explanation:

Given that,

Jessica is a 25% partner in the JRL Partnership

Cash received = $40,000

Jessica's partnership interest (basis) = $28,000

JRL has no hot assets or liabilities

Capital Gain on Distribution = Total Amount Received - Basis in Firm + Liability in Partnership

                                              = $40,000 - $28,000 + $0

                                              = $12,000

Therefore, $12,000 is the amount and character of Jessica's gain from the distribution.