Exam 11: Partnerships: Distributions, Transfer of Interests, and Terminations

Match the following statements with the best match from the choices below. Note: Choice L may be used more than once -Unrealized receivable

The RST Partnership makes a proportionate distribution of its assets to Ryan, in complete liquidation of his partnership interest. The distribution consists of $40,000 in cash and capital assets with a basis to the partnership of $30,000 and a fair market value of $48,000. None of the payment is for partnership goodwill. At the time of the distribution, Ryan's partnership basis is $45,000 and the partnership has no liabilities and no "hot assets." If the partnership makes an optional basis adjustment election on a timely filed return, it recognizes:

A partnership may make an optional election to adjust the basis of its property on a distribution to a partner which liquidates the partner's entire interest in the partnership. If such an election is in effect, the partnership:

The Crimson Partnership is a service provider. Its assets consist of unrealized receivables (basis of $0, fair market value of $400,000), cash of $300,000, and land (basis of $200,000, fair market value of $300,000). Assume 20% general partner Jana has a basis in her partnership interest of $100,000. If the ongoing partnership distributes $200,000 of cash to Jana in liquidation of her interest in the partnership, she will recognize ordinary income of $80,000 and a capital gain of $20,000.

Match the following statements with the best match from the choices below. Note: Choice N may be used more than once -Stated goodwill

If a partnership incorporates, it is always deemed to first distribute all of its assets and liabilities to the partners in complete liquidation. Then the partners are deemed to contribute those assets to the new corporation (with the corporation assuming the related liabilities) in a transaction that qualifies under § 351.

In the year a donor gives a partnership interest to a donee, their share of the partnership's income is prorated between the donor and donee.

A payment to a retiring general partner for his or her share of goodwill of a partnership in which capital is a material income-producing factor is classified as a § 736(a) income payment and results in ordinary income to the retiring partner and a current deduction to the partnership, as long as the goodwill payment is provided for in the partnership agreement.