Exam 10: Special Partnership Issues

Jerry has a $50,000 basis for his interest in JJ Partnership before receiving a current distribution consisting of $8,000 in money, accounts receivable having a zero basis to the partnership, and land having a $28,000 basis to the partnership. What is Jerry's basis in his partnership interest after the distribution?

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

The CHS Partnership's balance sheet presented below is prepared on a cash basis at September 30 of the current year. Cindy withdraws from the partnership under an agreement whereby she takes one- third of each of the three assets and assumes $10,000 of the notes payable. Her basis for the partnership interest before any distribution is $25,000. What gain/loss should she report for tax purposes?

Identify which of the following statements is true.

Which of the following is a valid reason for making a 754 election?

The definition of "inventory" for purposes of Sec. 751 includes

What is included in the definition of unrealized receivables?

A new partner, Gary, contributes cash and assumes a share of partnership liabilities. Diane's capital, profits, and loss interest in the partnership is reduced by 5% due to the admission of Gary. The Sec. 751 rules do not apply. Partnership liabilities at the time Gary is admitted are $200,000, and all of the liabilities are recourse debts for which the partners share the economic risk of loss in the same way they share partnership profits. Diane's basis in the partnership interest prior to Gary's admission is $5,000. Due to the admission of Gary, partner Diane has

When a retiring partner receives payments that exceed the value of that partner's partnership property, the excess payment is a guaranteed payment.

Identify which of the following statements is true.

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 conditions are required for a partner to recognize a loss upon receipt of a distribution from a partnership?

Identify which of the following statements is true.

A partnership terminates for tax purposes

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?

On November 30, Teri received a current distribution of cash of $4,000, marketable securities with a basis of $24,000 and an FMV of $30,000, and inventory with a basis of $2,000 and an FMV of $6,000. Prior to the distribution, Teri's basis in her interest in the partnership was $30,000. (There is no Sec. 751 exchange as a result of the distribution.) How much gain (if any) must Teri recognize as a result of the distribution?

Brown Company recently has been formed as a limited liability company (LLC). Brown Company is owned equally by three individuals-Gene, Susan, and Sandra-all of whom have substantial income from other sources. Brown is a manufacturing firm and expects to earn approximately $130,000 of ordinary income and $30,000 of long- term capital gain each year for the next several years. Gene will be a full- time manager and will receive a salary of $60,000 each year. What tax issues should the owners consider regarding the LLC's initial year of operations?

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

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?