Question

1.

Exercise 11-14 (Algorithmic) (LO. 3)

When Magdalena's outside basis is $132,500, she receives a liquidating distribution of $33,125 cash and a proportionate share of inventory having a partnership basis of $46,375 and a fair market value of $53,000. The distribution results in a liquidation of both the partnership and her interest.

a.   How much is Magdalena's basis in the inventory received?
$.............?

b.   What is the amount of any gain or loss recognized on the liquidation?
She has a recognized ................. of $..........? on the liquidation.

Exercise 11-13 (Algorithmic) (LO. 3)

When Bruno's basis in his LLC interest is $297,600, he receives cash of $119,040, a proportionate share of inventory, and land in a distribution that liquidates both the LLC and his entire LLC interest. The inventory has a basis to the LLC of $74,400 and a fair market value of $95,232. The land's basis is $133,920, and the fair market value is $119,040. How much gain or loss does Bruno recognize, and what is his basis in the inventory and land received in the distribution?

If an amount is zero, enter "0".

Bruno recognizes   of $ $ . Bruno's basis in the inventory is $ and his basis in the land is $.

Answer 1

Exercise 11-14 :

a. Magdalena’s basis in the inventory is $46,375 which reduces her remaining basis in the partnership interest to $53,000 ($132,500 basis in interest – $33,125 cash – $46,375 inventory).

b. She may claim the $53,000 as a loss. She may recognize this capital loss because she received only cash, inventory, and accounts receivable, and her basis in those assets (the same as the partnership’s basis) is less than her basis in the partnership interest before the distribution.

Exercise 11-13 :

Bruno recognizes no gain or loss. Bruno takes a carryover basis of $74,400 in the inventory, and has a substituted basis of $104,160 for the land. [The land basis equals his remaining basis in the partnership interest after the cash and inventory are distributed ($297,600 – $119,040 – $74,400)].