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

Match the following statements with the best match from the following choices. Choice M may be used more than once. -General partner

In a proportionate liquidating distribution of his 40% interest in the RST LLC, Stuart received cash $100,000), land basis of $60,000 and value of $90,000), and inventory basis of $30,000 and value of $40,000). In addition, Stuart is relieved of his $80,000 share of the LLC's liabilities. Stuart's basis in RST including his share of LLC liabilities) was $200,000 immediately prior to this distribution. a. How much gain or loss does Stuart recognize on this distribution? b. What is Stuart's basis in the land and inventory he receives in the distribution?

Which of the following statements is true regarding the sale of a partnership interest?

Lori, a partner in the JKL partnership, received a proportionate current nonliquidating) distribution of $10,000 cash, unrealized receivables with a basis of $0 and a fair market value of $15,000, and land with a basis of $6,000 and a fair market value of $10,000. Her basis in the partnership interest immediately before the distributions was $14,000. She will recognize $0 gain on the distribution, and her basis in the receivables and land will be $0 and $4,000, respectively.

Which of the following statements, if any, about a multimember LLC is false?

Carl's basis in his LLC interest is $10,000. In a current nonliquidating) distribution, Carl receives land basis = $10,000; fair market value = $12,000); and inventory basis = $6,000; fair market value = $8,000). Carl takes a $10,000 basis in the land and a $0 basis in the inventory, and has a $0 basis in the LLC interest.

Zach's partnership interest basis is $100,000. Zach receives a proportionate, liquidating distribution from a liquidating partnership of $50,000 cash and inventory having a basis of $20,000 to the partnership and a fair market value of $30,000. Zach assigns a basis of $20,000 to the inventory and recognizes a $30,000 loss.

On December 31 of last year, Maria gave her daughter, Chelsea, a gift of a 25% interest in a partnership in which capital is a material income-producing factor. For the current calendar year, the partnership's ordinary income was $100,000. Maria and Chelsea were the only partners, and there were no guaranteed payments. Maria's services performed for the partnership were worth $60,000, and Chelsea has never performed any services. What is Maria's distributive share of partnership income for the current year?

A cash distribution from a partnership to a partner generally is taxable to the partner.

Match the following statements with the best match from the following choices. Choice M may be used more than once. -Mandatory step down

Matt, a partner in the MB Partnership, receives a proportionate, current nonliquidating) distribution of property having a fair market value of $16,000 and a partnership basis of $23,000. Matt's basis in the partnership is $10,000 before the distribution. In this situation, Matt will recognize no gain or loss. He takes a $10,000 basis in the property, and his basis in the partnership interest is reduced to zero.

Match the following independent descriptions as hot i.e., ordinary income-producing) or nonhot assets with the following statements. -Marketable securities not held as inventory).

On August 31 of the current tax year, the balance sheet of the RBD General Partnership reads as follows Adjusted Basis FMV Cash \ 150,000 \ 150,000 Receivables -0- 90,000 Capital assets Total \ 750,000 \ 900,000 Nonrecourse debt \ 150,000 \ 150,000 Rachel, capital 200,000 250,000 Barry, capital 200,000 250,000 Dale, capital Total \ 750,000 \ 900,000 On that date, Rachel sells her one-third partnership interest to Lisa for $300,000, consisting of cash and relief of Rachel's share of the nonrecourse debt. The nonrecourse debt is shared equally among the partners. Rachel's outside basis for her partnership interest is $250,000 including her share of partnership debt). How much capital gain and/or ordinary income will Rachel recognize on the sale?

Jeremy sold his 40% interest in the HIJ Partnership to Ashley for $400,000. The inside basis of all partnership assets was $600,000 at the time of the sale. If the partnership makes a § 754 election, it will record a $160,000 step-up in the basis of the partnership assets, and the step-up will be attributed solely to Ashley.

In a proportionate current nonliquidating) distribution, cash is deemed to be distributed first followed by capital and § 1231 assets, and last, unrealized receivables and inventory.

The BLM LLC's balance sheet on August 31 reads as follows. Adjusted Basis FMV Cash \ 60,000 \ 60,000 Receivables -0- 150,000 Capital assets \ 150,000 \ 510,000 Nonrecourse debt \ 90,000 \ 90,000 Barney, capital 20,000 140,000 Lillie, capital 20,000 140,000 Marshall, capital 20,000 \ 150,000 \ 510,000 The nonrecourse debt is shared equally among the LLC members. On that date, Lillie sells her one-third interest to Robyn for $170,000, including cash and relief of Lillie's share of the nonrecourse debt. Lillie's outside basis for her interest in the LLC is $50,000, including her share of the LLC's debt. How much capital gain and/or ordinary income will Lillie recognize on the sale?

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

Nicky's basis in her partnership interest was $150,000, including her $40,000 share of partnership liabilities. The partnership decides to liquidate, and after repaying all liabilities, distributes all remaining assets proportionately to the partners. Nicky receives $30,000 cash and inventory with a $50,000 basis and a $58,000 fair market value to the partnership. What loss does Nicky recognize, and what is her basis in the inventory?

Match the following statements with the best match from the following choices. Choice K may be used more than once. -Nonqualified distribution

In a proportionate liquidating distribution in which the partnership is also liquidated, Ralph received cash of $30,000, accounts receivable basis of $0, fair market value of $20,000), and land basis of $1,000, fair market value of $10,000; treated as a capital asset by the partnership). Immediately before the distribution, Ralph's basis in the partnership interest was $40,000. Ralph realizes and recognizes a loss of $9,000, and his basis is $0 in the accounts receivable and $1,000 in the land.