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The Lexington Partnership has a depreciable business asset (personal property) that it originally purchased for $81,800. The asset now has an adjusted basis of $49,080 and a market value of $98,160. The partnership has no other potential hot assets. Ambroz sells his 25% interest in the partnership. a. How much is Lexington's depreciation recapture potential

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Answer:

Question b: How much ordinary income does Ambroz recognize when he sells this partnership interest?

a. Since the market value is more than its original cost, therefore, the completed depreciation can be potentially recaptured

Lexington's depreciation recapture potential = $81,800 - $49,080

Lexington's depreciation recapture potential = $32,720

b. Ambroz recognizes Ordinary income of: $32,720*25% = $8180