Question

# Andrew has a \$60,000 basis in his one-third interest in the JAS Partnership when he sells...

Andrew has a \$60,000 basis in his one-third interest in the JAS Partnership when he sells it to Miguel for \$80,000 in cash. Andrew's basis includes his share of liabilities and his share of income up to the sale date. On the sale date, the general partnership reports \$30,000 of liabilities and the following assets:

Partnership's

 Assets Basis FMV Cash \$ 51,000 \$ 51,000 Receivables -0- 36,000 Land 129,000 183,000 Total: \$180,000 \$270,000

Required:

1. Determine the amount and the nature of Andrew's gain or loss on     the sale of his partnership interest.
2. What deduction, if any, does the partnership get as a result of the sale?
3. What is Miguel’s basis in the partnership interest acquired?
4. If the partnership has an optional adjustment-to-basis election in effect, what adjustment(s) would be made after the sale of Andrew’s interest to Miguel? When the receivables are collected, what would be the amount and the nature of the of any income allocated to Miguel and Partners J and S (assume that J and S also have a one-third interest)?

#### Homework Answers

Answer #1

Answer :

Andew's Gain or Loss is calculated as below

 Cash Received \$80,000 (+) Relief from liability \$10,000 Amount Realized \$90,000 (-) Andrew's Basis \$60,000 Andrew's Gain /loss \$30,000

Andew's gain would be reported as capital gain

(2). Partnership does not get any deduction as a result of sale

(3). Miguel's basis = Carryover basis = \$60,000

(4) Miguel's share of net asset = \$80,000

Thus adjustments to basis would be = \$80,000 - \$60,000 = \$20,000

(5).When receivable are receivable income of each partner would = 36000/3 = \$12000 each.

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