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Exam 21: Dispositions of Partnership Interests and Partnership Distributions

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Question 21

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Which of the following statements regarding liquidating distributions is true?

A) A partner will recognize a gain when the partnership distributes only money and the amount is greater than the partner's outside basis.
B) A partner will recognize a gain when the partnership distributes only money and hot assets and the inside bases of the distributed assets are greater than the partner's outside basis.
C) A partner will recognize a gain when the partnership distributes money, hot assets, and other property and the inside bases of the distributed assets are greater than the partner's outside basis.
D) A partner will recognize a gain when the partnership distributes only money and the amount is less than the partner's outside basis.

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Question 22

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A partner that receives cash in an operating distribution recognizes gain if the cash distributed exceeds the partner's outside basis in the partnership immediately before the distribution.

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Question 23

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Daniel's basis in the DAT Partnership is $135,000. DAT distributes its land to Daniel in complete liquidation of his partnership interest. DAT reports the following balance sheet just before the distribution: If DAT has a §754 election in place, what is the amount of the special basis adjustment resulting from the distribution to Daniel? What is DAT's basis in its remaining assets?

Katrina is a one-third partner in the KYR partnership (calendar year-end). Katrina decides she wants to exit the partnership and receives a proportionate distribution to liquidate her partnership interest on January 1. The partnership has no liabilities and holds the following assets as of January 1: Katrina receives one-third of each of the partnership assets. She has a basis in her partnership interest of $250,000. What is the amount and character of any recognized gain or loss to Katrina? What is Katrina's basis in the distributed assets?

The VRX Partnership (a calendar year-end entity) has the following assets and no liabilities: The equipment was purchased for $360,000 and VRX has taken $90,000 of depreciation. The stock was purchased 7 years ago. What are VRX's hot assets for purposes of a sale of partnership interest?

Unrealized receivables include accounts receivable for which of the following partnerships?

Doris owns a 1/3 capital and profits interest in the calendar-year DB Partnership. Her adjusted basis for her partnership interest on July 1 of the current year is $20,000. On that date, she receives an operating distribution of her share of partnership assets shown below: What is the amount and character of Doris' gain or loss on the distribution? What is her basis in the distributed assets?

When determining a partner's gain on sale of his partnership interest, the selling partner must include her share of partnership debt in the amount realized.

Randolph is a 30% partner in the RD Partnership. On January 1, RD distributes $15,000 cash and inventory with a fair value of $20,000 (inside basis of $10,000) to Randolph in complete liquidation of his interest. RD has no liabilities at the date of the distribution. Randolph's basis in RD is $27,000. What is the amount and character of Randolph's gain or loss on the distribution?

Randolph is a 30% partner in the RD Partnership. On January 1, RD distributes $26,000 cash to Randolph in complete liquidation of his interest. RD has only capital assets and no liabilities at the date of the distribution. Randolph's basis in RD is $37,000. What is the amount and character of Randolph's gain or loss on the distribution?

Which of the following is false concerning special basis adjustments?

The SSC Partnership balance sheet includes the following assets on December 31 of the current year: Susan, a 1/3 partner, has an adjusted basis of $90,000 for her partnership interest. If Susan sells her entire partnership interest to Emma for $100,000 cash, what is the amount and character of Susan's gain or loss from the sale?

Carmello is a one-third partner in the CDW Partnership with equal inside and outside bases. On December 31, Carmello sells his interest to Conrad for $100,000 cash. CDW makes a §754 election and its balance sheet as of December 31 is as follows: What is the amount of Conrad's special basis adjustment? If CDW sells the capital asset next year for $300,000, what is the amount of gain Conrad will recognize because of the sale?

Daniela is a 25% partner in the JRD Partnership. On January 1, JRD distributes $16,000 cash, inventory with a $16,000 fair value (inside basis $8,000) , and accounts receivable with a fair value of $8,000 (inside basis of $0) to Daniela. JRD has no liabilities at the date of the distribution. Daniela's basis in JRD is $21,000. What is Daniela's basis in the distributed inventory and accounts receivable?

Catherine is a 30% partner in the ACW Partnership with an outside basis of $20,000. ACW distributes land with a basis of $12,000 and fair value of $18,000 to Catherine in complete liquidation of her interest. Catherine recognizes a capital loss of $2,000 on the distribution.

Which of the following statements is false concerning partnership liquidating distributions?

Joan is a 30% partner in the OJT Partnership when she sells her entire interest to Crissy for $100,000 cash. At the time of the sale, Joan's basis in OJT is $63,000 (which includes her $10,000 share of OJT liabilities). OJT does not have any hot assets. What is the amount and character of Joan's gain or loss on the sale?

Daniela is a 25% partner in the JRD Partnership. On January 1, JRD distributes $16,000 cash, inventory with a $16,000 fair value (inside basis $8,000) , and accounts receivable with a fair value of $8,000 (inside basis of $12,000) to Daniela. JRD has no liabilities at the date of the distribution. Daniela's basis in JRD is $20,000. What is Daniela's basis in the distributed inventory and accounts receivable?

Which of the following is true concerning a partner's basis in assets (other than money) distributed in an operating distribution?

Lola is a 35% partner in the LW Partnership. On January 1, LW distributes $39,000 cash to Lola in complete liquidation of her partnership interest. LW has only capital assets and no liabilities at the date of the distribution. Lola's basis in LW is $30,000. What is the amount and character of Lola's gain or loss?