Why is there ordinary income on a sale of a partnership interest?

Regarding this, how do you calculate gain on sale of partnership interest?

When a partnership interest is sold, gain or loss is determined by the amount of the sale minus the partner's interest, which is often referred to as the partner's outside basis.

One may also ask, what type of gain is sale of partnership interest? Publication 541, Partnership interests An interest in a partnership or joint venture is treated as a capital asset when sold. The part of any gain or loss from unrealized receivables or inventory items will be treated as ordinary gain or loss.

Additionally, is the sale of a partnership interest a capital gain?

Generally, a partner selling his partnership interest recognizes capital gain or loss on the sale. The amount of the gain or loss recognized is the difference between the amount realized and the partner's adjusted tax basis in his partnership interest.

What are hot assets and why are they important in the sale of a partnership interest?

During the sale of an interest in partnership if the seller recognizes the gain attributable to unrealized receivables or inventory items then this gives rise to ordinary gain instead of capital gain. The assets that give rise to this ordinary gain and loss are called as hot assets.