Taylor’s basis in his partnership interest is $140,000, including his $60,000 share of partnership debt. Sandy buys Taylor’s partnership interest for $100,000 cash, and she assumes Taylor’s $60,000 share of the partnership’s debt. If the partnership owns no hot assets, Taylor will recognize a capital loss of $40,000.
Answer the following statement true (T) or false (F)
False
Rationale: The partner's share of partnership debt is included in both the partner's basis in the partnership interest and in the proceeds received on the sale. Taylor's sales price for the interest is $160,000 ($100,000 cash + $60,000 assumption of partnership debt). Because his basis was $140,000, he realizes a capital gain of $20,000.
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