Exam 10: Special Partnership Issues

Marc is a calendar- year taxpayer who owns a 30% capital and profits interest in the MN Partnership. Nancy sells the remaining 70% capital and profits interest to Henry on October 31. The partnership year- end is March 31 as permitted by the IRS for business purpose reasons. The MN Partnership

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?

Becky has a $24,000 basis in her partnership interest. She receives a current distribution of $4,000 cash, unrealized receivables with a basis of $12,000 and an FMV of $16,000, and land held as an investment with a basis of $3,000 and an FMV of $8,000. The partners' relative interests in the Sec. 751 assets do not change as a result of the current distribution. The basis of her partnership interest following the distribution is

Helmut contributed land with a basis of $5,000 and an FMV of $10,000 to the HG Partnership five years ago to acquire a 50% partnership interest. This year the land is distributed to another partner, Gail, when its FMV is $11,000. No other distributions have been made since Helmut became a partner. When the land is distributed to Gail, Helmut recognizes a gain of

Identify which of the following statements is true.

The total bases of all distributed property in the partner's hands following a nonliquidating distribution is limited to

Quinn and Pamela are equal partners in the QP Partnership. On December 30 of the current year, the QP Partnership agrees to liquidate Quinn's partnership interest for a cash payment on December 30 of each of the next five years. What tax issues should Quinn and Pamela consider with respect to the liquidation of Quinn's partnership interest?

Identify which of the following statements is true.

David sells his one- third partnership interest to Diana for $60,000 when his basis in the partnership interest is $48,000. On the date of sale, the partnership has no liabilities and the following assets: The building is depreciated on a straight- line basis. What tax issues should David and Diana consider with resp to the sale transaction?

Bart has a partnership interest with a $32,000 basis. He receives a current distribution of $6,000 cash, unrealized receivables (FMV $9,000, basis $10,000), inventory (FMV $8,000, basis $4,000), investment land (FMV $7,000, basis $4,000), and building (FMV $20,000, basis $8,000). No depreciation recapture applies with respect to the building. The partners' relative interests in the Sec. 751 assets do not change as a result of the current distribution. Bart's basis in the building is

When Rachel's basis in her interest in the RST Partnership is $40,000, she receives a current distribution of office equipment. The equipment has an FMV of $60,000 and a basis of $50,000. Rachel will not use the office equipment in a business activity. What tax issues should Rachel consider with respect to the distribution?

Adnan had an adjusted basis of $11,000 for his interest in the Adnan and Donnell Partnership on December 31. On this date, Adnan received from the partnership, in complete liquidation of his interest, $10,000 cash and land with a $2,000 basis to the partnership and a $3,000 FMV. What is Adnan's basis for the land distributed to him?

Identify which of the following statements is false.

If a partner dies, his or her tax year closes

Last year, Cara contributed investment land with an FMV of $24,000 and basis of $18,000 to the CDE Partnership. CDE made no distributions during last year, and Cara's basis in her partnership interest on December 31 of last year was $28,000. On January 1 of this year, the partnership distributed cash of $30,000 to Cara and distributed the land contributed by Cara to another partner, David. On the distribution date, the land had a $27,000 FMV. Assume the CDE Partnership reported no profit or loss this year. How much gain (if any) must Cara recognize as a result of the distributions? What is her basis in the partnership after the distributions?

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?

Identify which of the following statements is true.

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

The ABC Partnership owns the following assets on December 31. The indication that ABC owns substantially appreciated inventory is

If a distribution occurs within years of the contribution date, in a nonliquidating distribution that does not qualify for Sec. 751 treatment, the distribution event may trigger a precontribution gain or loss.