How is the amount realized on the sale of a partnership interest calculated?

The amount realized on the sale of a partnership interest is calculated by taking into account all forms of consideration received from the sale. This includes both cash received and any liabilities that the buyer assumes as part of the transaction. When a buyer assumes liabilities of the partnership, this effectively increases the total value that the seller has received from the sale because the seller is relieved of those liabilities.

For instance, if a partnership interest is sold for a certain amount of cash, and the buyer also assumes a portion of the partnership's liabilities, the total amount realized should include that cash plus the value of those assumed liabilities. This reflects the full economic benefit received by the seller for the partnership interest sold.

Considering this, other options fall short in capturing the complete picture of what constitutes the amount realized. The first option incorrectly subtracts liabilities rather than adding them when they are assumed by the buyer. The third option focuses solely on capital contributions and does not account for any cash received or liabilities assumed. The last option completely ignores the impact of any liabilities assumed, which is critical for calculating the total amount realized. Thus, understanding this financial aspect is crucial for accurately determining the gain or loss on the sale of a partnership interest.