Lonnie Davis has been a general partner in the Highland Partnership for many years and is also a sole proprietor in a separate business. To spend more time focusing on his sole proprietorship, he plans to leave Highland and will receive a liquidating distribution of $66,500 in cash and land with a fair market value of $132,500 (tax basis of $176,000). Immediately before the distribution, Lonnie’s basis in his partnership interest is $392,000, which includes his $85,500 share of partnership debt. The Highland Partnership does not hold any hot assets. What is the amount and character of Lonnie’s gain or loss if he places the land into service in his sole proprietorship and then sells it 13 months later for $165,000?

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Lonnie Davis has been a general partner in the Highland Partnership for many years and is also a sole proprietor in a separate business. To spend more time focusing on his sole proprietorship, he plans to leave Highland and will receive a liquidating distribution of $66,500 in cash and land with a fair market value of $132,500 (tax basis of $176,000). Immediately before the distribution, Lonnie’s basis in his partnership interest is $392,000, which includes his $85,500 share of partnership debt. The Highland Partnership does not hold any hot assets.

What is the amount and character of Lonnie’s gain or loss if he places the land into service in his sole proprietorship and then sells it 13 months later for $165,000?

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