Exam 10: Special Partnership Issues

Rod owns a 65% interest in the RRR Partnership, a general partnership, which he sells to the two remaining partners - Roger and Regis. The three partners have agreed that Rod will receive $160,000 in cash from the sale. Rod's basis in the partnership interest before the sale is $125,000, which includes his $35,000 share of partnership recourse liabilities. The partnership has assets with a $310,000 FMV and a $210,000 adjusted basis. What issues should Rod, Roger, and Regis consider before this sale takes place?

Identify which of the following statements is true.

Mirabelle contributed land with a $5,000 basis and a $9,000 FMV to MS Partnership four years ago. This year the land is distributed to Sergio, another partner in the partnership. At the time of distribution, the land had a $12,000 FMV. How much gain should Mirabelle and Sergio recognize?

Tenika has a $10,000 basis in her interest in the TF Partnership and no remaining precontribution gain immediately before receiving a current distribution that consisted of $4,000 in money, plastic tubes held in inventory with a $3,000 basis to the partnership and an FMV of $3,375, and drip irrigation pipe held as inventory with a $6,000 basis to the partnership and an FMV of $5,000. What is the basis in Tenika's hands of the distributed property?

What is the character of the gain/loss on the sale of a partnership interest?

A partnership terminates for tax purposes

The TK Partnership has two assets: $20,000 cash and a machine having a $28,000 basis and a $40,000 FMV. The partnership has claimed $16,000 in depreciation on the machine since its purchase. If the machine is sold for its FMV, would TK Partnership have an unrealized receivable item?

Identify which of the following statements is true.

The AB Partnership has a machine with an FMV of $25,000 and a basis of $20,000. The partnership has taken an $8,000 depreciation on the machine. The unrealized receivable related to the machine is

In a current distribution, the partner's basis in the partnership interest is reduced by the amount of money received and by the partnership's bases in the distributed property.

Tony sells his one-fourth interest in the WindyCity Partnership to Bill for $100,000 cash when the partnership's assets are as follows: The partnership has no liabilities on the sale date. Tony's basis in his partnership interest on the date of the sale is $60,000. What is the amount of gain realized by Tony on the sale of his partnership interest?

What is the definition of "substantially appreciated inventory"?

Danielle has a basis in her partnership interest of $12,000. She receives a current distribution of $8,000 cash and equipment with a basis of $7,000. There is no potential gain under Sec. 737. What is her basis in the equipment?

Ted King's basis for his interest in the Troy Partnership is $24,000. In complete liquidation of his interest, King receives cash of $4,000 and real property (not a Sec. 751 asset) having an FMV of $40,000. Troy's adjusted basis for this realty is $15,000. Section 736 does not apply. King's basis for this realty is

Han purchases a 25% interest in the CHOP Partnership from Huang for $600,000. The partnership has assets with a basis of $1,600,000. What is the amount of the basis adjustment, if the partnership has a 754 election in place?

A partner can recognize gain, but not loss, on a liquidating distribution.

Can a partner recognize both a gain and a loss on the sale of a partnership interest? If so, under what conditions?

Tony sells his one-fourth interest in the WindyCity Partnership to Bill for $100,000 cash when the partnership's assets are as follows: The partnership has no liabilities on the sale date. Tony's basis in his partnership interest on the date of the sale is $60,000. What are the amount and character of Tony's gain?

On December 31, Kate sells her 20% interest (with a basis of $18,000 which, of course, includes a share of partnership liabilities) in the KLM Partnership to Karl for $27,000 cash plus assumption of her $6,000 share of liabilities. On that date, the partnership has the following balance sheet: What are the amount and character of the gain that Kate must recognize on the sale?

Identify which of the following statements is true.