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

Landis received $90,000 cash and a capital asset basis of $50,000, fair market value of $60,000) in a proportionate liquidating distribution. His basis in his partnership interest was $120,000 prior to the distribution. How much gain or loss does Landis recognize, and what is his basis in the asset received?

Match the following statements with the best match from the following choices. Choice M may be used more than once. -Section 754

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

Which of the following is not typically considered a hot asset?

Beth sold her 25% partnership interest to Katie for $50,000 cash on July 1 the halfway point) of the current tax year. Katie also assumed Beth's share of the partnership's liabilities. Beth's basis in her partnership interest at the beginning of the year was $40,000, including a $15,000 share of partnership liabilities. The partnership's income for the entire year was $100,000, and Beth's share of partnership debt was $10,000 as of the date she sold the partnership interest. Assume the calendar year partnership has no hot assets, all of its income is earned evenly throughout the year, and the partnership uses the monthly proration method to allocate its income among the partners. Beth recognizes a gain of $12,500 on the sale.

The December 31 balance sheet of the RST General Partnership reads as follows. Adjusted Basis FMV Cash \ 65,000 \ 65,000 Receivables -0- 7,500 Capital and \S1231 assets 55,000 100,000 Total \ 120,000 \ 172,500 Roy, capital \ 40,000 \ 57,500 Sue, capital 40,000 57,500 Ted, capital 40,000 57,500 Total \ 120,000 \ 172,500 The partners share equally in partnership capital, income, gain, loss, deduction, and credit. Ted's adjusted basis for his partnership interest is $40,000. On December 31, general partner Ted retires from the partnership, receiving a $60,000 cash payment in liquidation of his interest. The partnership agreement states that $2,500 of the payment is for goodwill. Which of the following statements about this distribution is false?

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

In addition to its other assets, BC LLC owns unrealized receivables basis = $0, fair market value = $60,000). If BC distributes $60,000 cash to Bart and the unrealized receivable to Charles, then Bart will recognize ordinary income of $30,000 and Charles will have a basis of $30,000 in receivables valued at $60,000.

Anthony's basis in the WAM Partnership interest was $200,000 just before he received a proportionate liquidating distribution consisting of investment land basis of $90,000, fair market value of $100,000), and inventory basis of $30,000, fair market value of $70,000). After the distribution, Anthony's recognized gain or loss and his basis in the land and inventory are:

Match the following statements with the best match from the following choices. Choice K may be used more than once. -Substantially appreciated inventory

Serena owns a 40% interest in the RST LLP. Partnership assets consist of land fair market value of $100,000, basis of $80,000), accounts receivable fair market value of $120,000, basis of $0), and cash of $180,000. Serena sells her interest in RST to Jaclyn for cash of $140,000. In addition, Jaclyn assumes Serena's $40,000 share of the LLP's liabilities. Serena's basis in the partnership interest including her share of the partnership's liabilities) is $120,000 immediately before the sale. a. How much gain or loss does Serena recognize and what is its character? b. What is Jaclyn's basis in the partnership interest? c. If the LLP has a § 754 election in effect, how much is the adjustment and to which partners) is it allocated?

Match the following independent distribution payments in liquidation of a partner's interest in an ongoing partnership with the statements below. -Distribution of $100,000 cash to a managing member general partner) in a cash basis service-oriented LLC for the member's share of unrealized receivables and land.

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

Last year, Darby contributed land basis of $60,000, fair market value of $80,000) to the Seagull LLC in exchange for a 25% interest in the LLC. In the current year, the LLC distributes the land now worth $82,000) to Shelby, who is also a 25% owner. Immediately prior to the distribution, Darby's basis in the LLC was $70,000, and Shelby's basis in the LLC was $110,000. How much gain or loss must be recognized and by whom? What is Shelby's basis in the property she receives and Darby's basis in her partnership interest following the distribution?

Match the following statements with the best match from the following choices. Choice M may be used more than once. -Limited liability partnership

Marcella is a 40% nonmanaging member treated as a limited partner) in the MNO LLC in which capital is a material income-producing factor. MNO has inventory with a basis of $200,000 and a value of $250,000 but no other hot assets. Marcella's basis in the LLC interest is $80,000. If she receives a distribution of $180,000 cash in liquidation of her interest in the LLC, which one of the following statements is not true?

Roman was a 40% partner in the calendar year POR LLC. When Roman died on April 30, the interest transferred to his estate. On November 1 of that year, Tiwanda, an unrelated third party, negotiated a buyout and acquired Roman's interest with the approval of the other LLC members). The LLC's operating agreement provides that a monthly allocation will be used to prorate income when required. If the LLC's income for the year was $300,000, how will it be allocated?

Josh owns a 25% capital and profits interest in the calendar year GDJ Partnership. His adjusted basis for his partnership interest on October 15 of the current year is $300,000. On that date, the partnership liquidates and makes a proportionate distribution of the following assets to Josh. Partnership's Basis in Asset Asset's Fair Market Value Cash \ 70,000 \ 70,000 Inventory 120,000 150,000 a. Calculate Josh's recognized gain or loss on the liquidating distribution, if any, and his basis in the distributed inventory. How would your answer to a. change if the partnership also distributed a small parcel of land it b. had held for investment to Josh? Assume the land has a $5,000 adjusted basis FMV is $8,000) to the partnership.

Match the following statements with the best match from the following choices. Choice M may be used more than once. -Capital intensive partnership

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