Exam 21: Dispositions of Partnership Interests and Partnership Distributions

Tyson is a 25% partner in the KT Partnership. On January 1, KT makes a proportionate, liquidating distribution of $16,000 cash and land with a $16,000 fair value (inside basis$8,000) to Tyson. KT has no liabilities at the date of the distribution. Tyson's basis in KTis $20,000. What is the amount and character of Tyson's gain or loss from the distribution?

Marty is a 40% owner of MB Partnership. Marty has decided to sell his interest in the business to Emilio for$100,000 cash plus the assumption of his share of MB's liabilities. Assume Marty's inside and outside basis inMB are equal. MB shows the following balance sheet as of the sale date: What is the amount and character of Marty's recognized gain or loss?

In complete liquidation PW distributes the cash to Pamela and the unrealized receivables to Wade(equal partners). Pamela and Wade each have an outside basis in PW equal to $5,000. PWhas no liabilities at the time of the liquidation. What is the amount and character ofPamela's recognized gain or loss?

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

Locke is a 50% partner in the LS Partnership. Locke has a basis in his partnership interest of$84,000 at the end of the current year, prior to any distribution. On December 31, Locke receives an operating distribution of $30,000 cash. LS has no debt or hot assets. What is the amount andcharacter of Locke's recognized gain or loss? What is Locke's ending basis in his partnershipinterest?

Cash distributions include decreases in a partner's share of partnership liabilities.

Inventory is substantially appreciated if the fair market value of all inventory items exceeds 100% of their basis to the partnership.

A disproportionate distribution is a distribution in which the partner's share of the partnership's hot assets either increases or decreases as a result of the distribution.

The SSC Partnership balance sheet includes the following assets on December 31 of the curr3e6n) t year: Which of SSC's assets are considered hot assets under §751(a)?

Zayde is a 1/3 partner in the ARZ partnership with an outside basis of $156,000 on January 1. Zayde sells his partnership interest to Thomas on January 1st for $180,000 cash. The ARZ Partnership has the following assets and no liabilities as of January 1: The equipment was purchased for $360,000 and the partnership has taken $90,000 of depreciation. The stock was purchased 3 years ago. What is the amount and character of Zayde's gain or loss on thesale of his partnership interest?

A disproportionate distribution of hot assets is treated as though the partnershipdistributes a proportionate share of hot assets to the partner and then the partner sells those hot assets back to the partnership at fair market value in exchange for a portion of the assets actually received in the distribution.

The partnership making an operating distribution will recognize gain or loss only when the partner that receives the distribution recognizes gain or loss.

Under the entity concept, a partnership interest is an intangible asset similar to anownership interest in a corporation. As such, a partnership interest is generally treated as a capital asset, the disposal of which results in capital gain or loss.

Nadine Fimple is a one-third partner in the NWL Partnership with equal inside and outside bases. On January1, NWL distributes $100,000 to Nadine in complete liquidation of her FPL interest. NWL's balance sheet as ofJanuary 1 is as follows: What is the amount and character of Nadine's recognized gain or loss on the distribution?

Joan is a 30% partner in the OJT Partnership when she sells her entire interest to Crissy for$100,000 cash. At the time of the sale, Joan's basis in OJT is $63,000 (which includes her $10,000 share of OJT liabilities). OJT does not have any hot assets. What is the amount and character of Joan's gain or loss on the sale?

The SSC Partnership balance sheet includes the following assets on December 31 of the curr3e3n) t year: Susan, a 1/3 partner, has an adjusted basis of $90,000 for her partnership interest. If Susan sells her entire partnership interest to Emma for $120,000 cash, how much capital gain and ordinaryincome must Susan recognize from the sale?

At the end of last year, Cynthia, a 20% partner in the five-person CYG partnership, has an outside basis of $30,000 including her $15,000 share of CYG debt. On January 1 of the current year, Cynthia sells her partnership interest to Roger for a cash payment of$22,500 and the assumption of her share of CYG's debt. CYG has no hot assets. What is the amount and character of Cynthia's recognized gain or loss on the sale?

Jessica is a 25% partner in the JRL Partnership. On January 1, JRL distributes $40,000 cash to Jessica. JRL has no hot assets or liabilities at the date of the distribution. Jessica's basis in JRL is $28,000. What is the amount and character of Jessica's gain or loss from the distribution?

In the sale of a partnership interest, a selling partner will recognize ordinary income(rather than capital gain) when the partnership assets include cash and land held for 5 years as an investment.

A partner's debt relief from the sale of a partnership interest will decrease his outsidebasis.