Dora sells her one third interest in the DEF Partnership to Paul for
$100,000 cash. At the end of the year prior to the sale, Dora's basis
in DEF was $50,000. The partnership allocates $20,000 of income to
Dora for the portion or the year she was a partner. On the date of the
sale, the partnership assets and the agreed fair market values were as
follows:

                           Basis                  FMV
Cash                      $ 90,000                $ 90,000
Accounts Receivable       $      0                $ 60,000
Land                      $120,000                $150,000

Total                     $210,000                $300,000


Determine the amount and character of any gain that Dora recognizes on
the sale

Hello again.

The calculation of gain is governed by Internal Revenue Code Section
705.

The transferor's original $50,000 basis is increased, pursuant to §
705(a)(1), by the partner's $20,000 share of partnership taxable
income and tax exempt income.
Under §705(a)(2), the transferor's basis must be decreased by: the
amount of cash and the adjusted basis of property distributed to the
partner.

So I have two answers for you, depending on whether "The partnership
allocates $20,000 of income to Dora" means that was her share of
_undistributed_ income, or whether that was her share of income and
the $20,000 was _distributed_ to her by the partnership.

In other words, her basis is $70,000 if she did not receive a $20,000
partnership distribution, and $50,000 if she did.  My assumption based
on reading the statement of fact is that she did not receive a $20,000
distribution from the partnership, in which case her basis is $70,000
and her gain on the sale is $30,000.

As to the character of her gain, the general rule is it would be
capital gain, long-term or short-term depending on the length of time
she has been a partner.

But Code §751 treats the portion of the gain or loss realized on the
disposition that is attributable to the selling partner's interest in
partnership "unrealized receivables" as ordinary income or loss. So we
 determine the portion of the gain from a hypothetical sale of these
§751 assets that the partnership would allocate to the transferred
interest. And we calculate the transferor's net capital gain by
subtracting the partner's ordinary income from the overall gain or
loss that the partner realizes from the transfer.

In this case her share of the unrealized receivable would be 60,000/3
= 20,000.  So she has 20,000 of ordinary income on the sale of her
interest and 10,000 of capital gain.

Google search terms used
disposition of partnership interest "section 705"

Thanks again for your question.
Sincerely,
Richard-ga