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

Loss will be recognized on any distribution from a partnership in which cash,unrealized receivables and/or appreciated inventory are the only items distributed.

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:

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

A partnership continues in existence unless one of the following happens: 1)all assets are distributed to the partners in liquidation of the partnership,or 2)one partner buys the interest of the second partner in a two partner partnership (resulting in a single owner of the entity).

A partnership is required to make a downward adjustment to the basis of its assets if a partnership interest is sold and if the total decline in value of partnership assets is more than $250,000.

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:

A partnership has accounts receivable with a basis of $0 and a fair market value of $20,000 and depreciation recapture potential of $30,000.All other assets of the partnership are either cash,capital assets,or § 1231 assets.If a purchaser acquires a 40% interest in the partnership from another partner,the selling partner will be required to recognize ordinary income of $20,000.

Jonathon owns a one-third interest in a liquidating partnership.Immediately before the liquidation,Jonathon's basis in the partnership interest is $60,000.The partnership distributes cash of $32,000 and two parcels of land (each with a fair market value of $10,000).Parcel A has a basis of $2,000 to the partnership and Parcel B has a basis of $6,000.Jonathon's basis in the two parcels of land is:

Nicholas is a 25% owner in the DDBN LLC (a calendar year entity).At the end of the last tax year,Nicholas's basis in his interest was $50,000,including his $20,000 share of LLC liabilities.On July 1 of the current tax year,Nicholas sells his LLC interest to Anna for $80,000 cash.In addition,Anna assumes Nicholas's share of LLC liabilities,which,at that date,was $15,000.During the current tax year,DDBN's taxable income is $120,000 (earned evenly during the year).Nicholas's share of the LLC's unrealized receivables is valued at $6,000 ($0 basis).At the sale date,what is Nicholas's basis in his LLC interest,how much gain or loss must he recognize,and what is the character of the gain or loss?

Karli owns a 25% capital and profits interest in the calendar-year KJDV Partnership.Her adjusted basis for her partnership interest on July 1 of the current year is $200,000.On that date,she receives a proportionate nonliquidating distribution of the following assets:

Josh has 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.

Several years ago,the Jaymo Partnership purchased 2,000 shares of ABCO stock (publicly traded)for $40,000;the stock now has a fair market value of $90,000.If this stock is distributed to Jason in liquidation of his 30% partnership interest,it is treated as a cash distribution of $75,000 and a property distribution of $15,000.Assume Jaymo owns no other securities.

Cynthia sells her 1/3 interest in the CAR Partnership to Brandon for $95,000 cash.On the date of sale,the partnership balance sheet and agreed-upon fair market values were as follows: If the partnership has a § 754 election in effect,the total "step-up" in basis of partnership assets that will be allocated to Brandon is:

A disproportionate distribution arises when the partnership distributes a share of partnership hot assets to one or more partners that is not the same as the partner's ownership interest in the partnership.

Marcie is a 40% member of the M&A LLC.Her basis is $10,000 immediately before the LLC distributes to her $30,000 of cash and land (basis to the LLC of $20,000 and fair market value of $25,000).As a result of the proportionate,nonliquidating distribution,Marcie recognizes a gain of $20,000 and her basis in the land is $0.

Landon received $50,000 cash and a capital asset (basis of $70,000,fair market value of $80,000)in a proportionate liquidating distribution.His basis in his partnership interest was $100,000 prior to the distribution.How much gain or loss does Landon recognize and what is his basis in the asset received?

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,while 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?