Marco, Jaclyn, and Carrie formed Daxing Partnership (a calendar-year-end entity) by contributing cash 10 years ago. Each partner owns an equal interest in the partnership. Marco, Jaclyn, and Carrie each have an outside basis in his/her partnership interest of $104,000. On January 1 of the current year, Marco sells his partnership interest to Ryan for a cash payment of $137,000. The partnership has the following assets and no liabilities as of the sale date:

Tax Basis FMV

Cash $ 18,000 $ 18,000

Accounts receivable 0 12,000

Inventory 69,000 81,000

Equipment 180,000 225,000

Stock investment 45,000 75,000

Totals $ 312,000 $ 411,000

The equipment was purchased for $240,000, and the partnership has taken $60,000 of depreciation. The stock was purchased seven years ago

Required information

a. What are the hot assets $ 751(a)] for this sale?

i. Accounts receivable

ii. Inventory

iii. Stock investment

iv. Potential depreciation recapture in the equipment

b. What is Marcoâs gain or loss on the sale of his partnership interest?

c. What is the character of Marcoâs gain or loss?

i. $23,000 ordinary income and $10,000 capital gain

ii. $10,000 ordinary income and $23,000 capital gain

iii. $33,000 ordinary income

iv. $33,000 capital gain

v. None of these