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Video instructions and help with filling out and completing What Form 4797 Defined

Instructions and Help about What Form 4797 Defined

Okay let's continue talking about termination termination you're terminated your flier all right we're firing you now what does termination talk about termination basically says we've got this partnership and what's happening is we're ceasing the business so we're ceasing the business now and ceasing the business what it says is when a partner wishes to sell their interest to another partner the amount realized is the sum of so how much is realized it says the cash and the property received plus the relief from debt the relief from debt now what we're trying to do is we're trying to say there's kind of a special rule here normally as we said earlier like when you sell this thing it's generally considered a what a capital gain so for example let's see I'm liquidating I'm selling out and I go here's 10 and I got 15 boom here's a $5 gain and I said it's generally a capital gain okay that's great but there's some special rules and let's think about it for a minute because what's happening here is if for example I didn't sell my share of the partnership and I didn't leave if I stayed if receivables went up or inventory changes if I have any kind of income from inventory or receivables what is inventory or receivables considered those are considered what a current asset those are considered business assets any kind of gain from that would be what kind of gain any gain from that would be an ordinary gain right because inventory receivables would be considered an ordinary asset ordinary assets create ordinary income not a capital so because of that what it says is these inventories and receivables are called hot assets those are called the hot asset to the business so...