Exam 10: Dispositions of Partnership Interests and Partnership Distributions

Randolph is a 30percent partner in the RD Partnership. On January 1, RD distributes $15,000 cash, inventory with a fair value of $20,000 (inside basis of $10,000), and a parcel of land with a fair value of $10,000 (inside basis of $5,000) to Randolph in complete liquidation of his interest. RD has no liabilities at the date of the distribution. Randolph's basis in his RD Partnership interest is $37,000. What is Randolph's basis in the distributed inventory and land?

Under which of the following circumstances will a partner recognize a gain from an operating distribution?

A partner recognizes gain when she receives cash in excess of her outside basis in a liquidating distribution.

Lola is a 35percent partner in the LW Partnership. On January 1, LW distributes $39,000 cash to Lola in complete liquidation of her partnership interest. LW has only capital assets and no liabilities at the date of the distribution. Lola's basis in LW is $50,000. What is the amount and character of Lola's gain or loss?

Which of the following statements regarding disproportionate distributions is false?

Carmello is a one-third partner in the CDW Partnership with equal inside and outside bases. On December 31, Carmello sells his interest to Conrad for $108,000 cash. CDW makes a §754 election and its balance sheet as of December 31 is as follows: (Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.) What is the amount and sign (positive or negative) of Conrad's special basis adjustment? If CDW sells the capital asset next year for $297,600, what is the amount of gain Conrad will recognize because of the sale?

The VRX Partnership (a calendar year-end entity) has the following assets and no liabilities: The equipment was purchased for $360,000 and VRX has taken $90,000 of depreciation. The stock was purchased seven years ago. What are VRX's hot assets for purposes of a sale of partnership interest?

The purpose of hot asset rules is to ensure that selling partners recognize all gain or loss on the sale of their partnership interests as capital.

A partner that receives cash in an operating distribution recognizes loss if the cash distributed is less than the partner's outside basis in the partnership immediately before the distribution.

Daniel's basis in the DAT Partnership is $135,000. DAT distributes its land to Daniel in complete liquidation of his partnership interest. DAT reports the following balance sheet just before the distribution: If DAT has a §754 election in place, what is the amount and sign (positive or negative) of the special basis adjustment resulting from the distribution to Daniel? What is DAT's basis in its remaining assets?

Which of the following statements regarding a partner's basis of inventory received in a liquidating distribution is true?

BPA Partnership is an equal partnership in which each of the partners has a basis in her partnership interest of $20,000. BPA reports the following balance sheet: a. Identify the hot assets if Brooke decides to sell her interest in BPA. b. Are these assets "hot" for purposes of distributions? c. If BPA distributes the land to Brooke in complete liquidation of her partnership interest, what tax issues should be considered?

Nadine Fimple is a one-half partner in the NL Partnership with equal inside and outside bases. On January 1, NL distributes accounts receivable with a fair value of $107,000 to Nadine as an operating distribution. NL's balance sheet as of January 1 is as follows: What is the amount and character of Nadine's recognized gain or loss on the distribution?

Tyson is a 25percent 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 his KT Partnership interest is $20,000. What is the amount and character of Tyson's gain or loss from the distribution?

When a partner receives more than a proportionate share of hot assets in a distribution, the transaction is treated as though the partnership distributes a proportionate share of cold assets to the partner and then the partner sells some or allof those cold assets back to the partnership at fair market value in exchange for a portion of the hot assets actually received in the distribution.

Randolph is a 30percent partner in the RD Partnership. On January 1, RD distributes $25,000 cash and inventory with a fair value of $30,400 (inside basis of $15,200) to Randolph in complete liquidation of his interest. RD has no liabilities at the date of the distribution. Randolph's basis in his RD Partnership interest is $43,700. What is the amount and character of Randolph's gain or loss on the distribution?

Joan is a 30percent 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?

Joan is a one-third partner in the PDJ Partnership. PDJ Partnership uses the proration method to allocate income and losses to partners with varying interests. On May 1, Joan sells her interest to Freddie for a cash payment of $104,750. On January 1, Joan's basis in PDJ is $82,800. PDJ generates $68,100 of ordinary income and $12,900 of tax-exempt income during the first four months of the year. PDJ has the following assets and no liabilities at the sale date: (Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.) What is the amount and character of Joan's gain or loss on the sale?

Daniela is a 25percent partner in the JRD Partnership. On January 1, JRD makes a proportionate, liquidating distribution of $16,000 cash, inventory with a $16,000 fair value (inside basis $8,000), and accounts receivable with a fair value of $8,000 (inside basis of $12,000) to Daniela. JRD has no liabilities at the date of the distribution. Daniela's basis in her JRD Partnership interest is $20,000. What is the amount and character of Daniela's gain or loss from the distribution?

Lola is a 35percent partner in the LW Partnership. On January 1, LW distributes $40,500 cash to Lola in complete liquidation of her partnership interest. LW has only capital assets and no liabilities at the date of the distribution. Lola's basis in LW is $50,750. What is the amount and character of Lola's gain or loss?