Question

As of the end of the current tax
year, Valerie Fleming’s tax basis in her partnership interest was
$45,000. At that time she received a $60,000
*non-liquidating* cash distribution. Assume that all other
partners also received proportionate cash distributions, so that
the provisions of §751(b) do not apply to the distribution.
Immediately following the distribution, the partnership had the
following assets:

Basis FMV

Cash $ 10,000 $ 10,000

Accounts Receivable 0 45,000

Depreciable Equipment 50,000 80,000

Land (§1231 Asset) 25,000 145,000

Building 65,000 105,000

$140,000 $385,000

Assume that the partnership originally purchased the depreciable equipment for $100,000. The original purchase price of the building was $80,000. The equipment is being depreciated using accelerated depreciation, while the straight-line method is used for the building. The partnership had a §754 election in effect at the date of the distribution.

i. By how much will the partnership be required to adjust its tax basis in its remaining assets under §734(b) in connection with the distribution to Valerie?

i.To which class(es) of assets will the adjustment be allocated?

iii. How will the adjustment be allocated among the partnership’s remaining assets?

Answer #1

What is the tax treatment to a partner who receives a
liquidating distribution assuming the partnership has made a
Section 754 election. The distribution was cash of $10,000 and
capital assets of $30,000. The partner's basis before the
distribution was $50,000. What is the gain or loss for the partner,
the cash basis after the distribution, capital assets basis, and
Section 734 Adjustment?

Simon is a 30 percent partner in the SBD Partnership, a calendar
year-end entity. As of the end of this year, Simon has an outside
basis in his interest in SBD of $188,000, which includes his share
of the $60,000 of partnership liabilities. On December 31, SBD
makes a proportionate distribution of the following assets to
Simon:
Tax Basis
FMV
Cash
$
40,000
$
40,000
Inventory
55,000
65,000
Land
30,000
45,000
Totals
$
125,000
$
150,000
a1. What are the...

1. Wilma Clay and Nathan are equal partners in
the cousins partnership. At the end of the year, Wilma's tax basis
in her partnership interest was $14,000, clay's basis was $25,000
and Nathan’s basis $8,000. In a non-liquidating distribution, the
partnership distributed investment property to Clay with a tax
basis of $18,000 and a fair market value of $45,000.
a)How much gain must Clay recognize on receipt of the
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b) What basis will he take ii the property received...

1. In complete liquidation of her interest in
the Buyers Partnership, Sarah received a cash distribution of
$40,000. Her basis in the partnership interest prior to receipt of
the liquidating distribution was $48,000.
a). How much gain or loss must Sarah recognize on
receipt of the liquidating distribution? b).
Assume that Sarah received cash of only $25,000, and property worth
$15,000 in complete liquidation of her interest in
the partnership. How much gain or loss would she recognize? What
would...

Madison is a 35% partner in the Total Partnership, a
calendar-year-end entity. Madison has an outside basis in his
interest in Total Partnership of $198,000, which includes his share
of the $45,000 of partnership liabilities. On December 31, Total
makes a proportionate distribution of the following assets to
Madison:
BASIS
FMV
Cash
$50,000
$50,000
Inventory
$65,000
$75,000
Land
$50,000
$65,000
Totals
$165,000
$180,000
For an operating distribution, outline the tax consequences
(amount and character of recognized gain or loss, basis...

Rebecca has an $80,000 basis in her partnership interest when
she receives liquidating distributions from the partnership. She
receives cash of $44,000 and equipment with a $32,000 basis to the
partnership. What are the tax consequences of the liquidating
distributions to Rebecca?

Partner Z of the XYZ
partnership receives a liquidating distribution of the
following:
Basis
FMV
Cash
$40,000
$40,000
Inventory
$30,000
$45,000
Unrealized receiv.
$50,000
$45,000
1. Z’s basis in her
partnership interest was $95,000. What is her gain or loss and the
bases of the assets distributed to her?
2. Assume Z’s basis
in her partnership interest was $130,000. What is her gain or loss
and the bases of the assets distributed to her?
The capital
percentages are already factored...

Problem 11-24 (LO. 2) When Teri's outside basis in the TMF
Partnership is $80,000, the partnership distributes to her $30,000
cash, an account receivable (fair market value of $60,000, inside
basis to the partnership of $0), and a parcel of land (fair market
value of $60,000, inside basis to the partnership of $80,000). Teri
remains a partner in the partnership, and the distribution is
proportionate to the partners.
If an amount is zero, enter "0".
c. How much is Teri's...

Paula's basis in her partnership interest is $60,000. in
liquidation of her interest, the partnership make a proportionate
distribution to paula of $20,000 of cash, and inventory (basis of
$5,000 and value of $7,000). (Assume the partnership also
liquidates.)
a. How much gain or loss, if any, will Paula recognize on the
distribution?
b. What basis will Paula take in the inventory?
c. What are the tax consequences to the partnership?
d. Can you recommend an alternative distribution? Explain.
e....

Jack’s basis in JTD Partnership interest is $200,000 at the
beginning of the tax year. His share of partnership items is as
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$14,000 long-term capital gain. In addition, he received a $20,000
cash distribution during the year; and, his share of partnership
debt increased by $10,000. What is Jack’s ending basis in his
partnership interest?

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