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Exam 10: Special Partnership Issues

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Question 41

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The HMS Partnership,a cash method of accounting entity,has the following balance sheet at December 31 of last year: Sam,who has a one-third interest in profits,losses,and liabilities,sells his partnership interest to Beverly,for $77,000 cash on January 1 of this year.Sam's basis in his partnership interest (which,of course,includes a share of partnership liabilities)at the time of the sale was $17,000.In addition,Beverly assumes Sam's share of the partnership liabilities.What is the amount and character of the gain that Sam will recognize from this sale?

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Amount realized = $77,000 +$10,000 liabi...

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Question 42

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What are some advantages and disadvantages of making a Section 754 election?

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Advantages: Without a 754 election,if a ...

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Question 43

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Bart has a partnership interest with a $32,000 basis.He receives a current distribution of $6,000 cash,unrealized receivables (FMV $9,000,basis $10,000) ,inventory (FMV $8,000,basis $4,000) ,investment land (FMV $7,000,basis $4,000) ,and building (FMV $20,000,basis $8,000) .No depreciation recapture applies with respect to the building.The partners' relative interests in the Sec.751 assets do not change as a result of the current distribution.Bart's basis in the building is

Quinn and Pamela are equal partners in the QP Partnership.On December 30 of the current year,the QP Partnership agrees to liquidate Quinn's partnership interest for a cash payment on December 30 of each of the next five years.What tax issues should Quinn and Pamela consider with respect to the liquidation of Quinn's partnership interest?

The STU Partnership,an electing Large Partnership,has no passive activities and reports the following transactions for the year: net long-term capital losses $50,000,Sec.1231 gain $60,000,ordinary income $20,000,charitable contributions $15,000,and tax-exempt income $2,000.How much will be reported as long-term capital gains to its partners?

Han purchases a 25% interest in the CHOP Partnership from Huang for $600,000.The partnership has assets with a basis of $1,600,000.What is the amount of the basis adjustment,if the partnership has a 754 election in place?

Carlos has a basis in his partnership interest of $30,000.He receives a current distribution of $6,000 cash,unrealized receivables (FMV $11,000,basis $10,000) ,inventory (FMV $8,000,basis $4,000) ,land held as an investment (FMV $7,000,basis,$6,000) ,and building (FMV $21,000,basis $9,000) .The partners' relative interests in the Sec.751 assets do not change as a result of the current distribution.Carlos's basis in the building is

A partnership cannot recognize a gain or loss on a current distribution.

In a current distribution,the partner's basis in the partnership interest is reduced by the amount of money received and by the partnership's bases in the distributed property.

John has a basis in his partnership interest of $30,000.He receives a current distribution of $6,000 cash,unrealized receivables (FMV $11,000,basis $10,000) ,inventory (FMV $8,000,basis $4,000) ,and investment land (FMV $7,000,basis $6,000) .The partners' relative interest in the Sec.751 assets do not change as a result of the current distribution.His basis in the land is

Tony sells his one-fourth interest in the WindyCity Partnership to Bill for $100,000 cash when the partnership's assets are as follows: The partnership has no liabilities on the sale date.Tony's basis in his partnership interest on the date of the sale is $60,000.What is the amount of gain realized by Tony on the sale of his partnership interest?

Which of the following statements is correct?

The ABC Partnership owns the following assets on December 31. The indication that ABC owns substantially appreciated inventory is

For tax purposes,a partner who receives retirement payments ceases to be regarded as a partner

Rod owns a 65% interest in the RRR Partnership,a general partnership,which he sells to the two remaining partners - Roger and Regis.The three partners have agreed that Rod will receive $160,000 in cash from the sale.Rod's basis in the partnership interest before the sale is $125,000,which includes his $35,000 share of partnership recourse liabilities.The partnership has assets with a $310,000 FMV and a $210,000 adjusted basis.What issues should Rod,Roger,and Regis consider before this sale takes place?

Identify which of the following statements is true.

If a partnership asset with a deferred precontribution gain is distributed within seven years of acquisition in a nonliquidating distribution to a partner who did not contribute the asset,the precontribution gain must be recognized by the contributing partner.

Ten years ago,Latesha acquired a one-third interest in Dana Associates,a partnership,for $26,000 cash.This year,Latesha's entire interest in the partnership is liquidated when her basis is $24,000.Dana's assets consist of the following: cash,$20,000;inventory with a basis of $46,000 and an FMV of $40,000.Dana has no liabilities.Latesha receives the cash of $20,000 in liquidation of her entire interest.What is Latesha's recognized loss on the liquidation of her interest in Dana?

The AB Partnership has a machine with an FMV of $25,000 and a basis of $20,000.The partnership has taken an $8,000 depreciation on the machine.The unrealized receivable related to the machine is

Before receiving a liquidating distribution,Kathy's basis in her interest in the KLM Partnership is $30,000.The distribution consists of $5,000 in money,inventory having a $1,000 basis to the partnership and a $2,000 FMV,and two parcels of undeveloped land (not held as inventory) having basis of $3,000 and $9,000 to the partnership with FMVs of $5,000 and $12,000,respectively.What is Kathy's basis in each parcel of land?