Exam 10: Dispositions of Partnership Interests and Partnership Distributions

At the end of last year, Cynthia, a 20percent 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?

In an operating distribution, when a partnership distributes property other than money with a basis that exceeds the partner's outside basis, the partner assigns a carryover basis to the distributed asset and recognizes a gain.

The PW Partnership';s balance sheet includes the following assets immediately before it liquidates: 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. PW has no liabilities at the time of the liquidation. What is the amount and character of Wade's recognized gain or loss?

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 $30,000. What is the amount and character of Lola's gain or loss?

Kristen and Harrison are equal partners in the KH Partnership. The partners formed the partnership five years ago by contributing cash. Prior to any distributions Harrison has a basis in his partnership interest of $33,000. On December 31, KH makes a proportionate operating distribution of $43,000 cash to Harrison. What is the amount and character of Harrison's recognized gain or loss and what is his remaining basis in KH?

Marcella has a $65,000 basis in her 50percent partnership interest in the JM Partnership before receiving any distributions. This year JM makes a proportionate operating distribution to Marcella of $10,000 cash and inventory with an $80,000 fair value and a $40,000 basis to JM. What is Marcella's basis in the inventory and her remaining basis in JM after the distribution?

Under what conditions will a partner recognize a gain in a liquidating distribution?

Kathy is a 25percent partner in the KDP Partnership and receives $129,000 cash in complete liquidation of her partnership interest. Kathy's outside basis immediately before the distribution is $151,000. KDP currently has a §754 election in effect and has no hot assets or liabilities. Which of the following statements is true?

At the end of last year, Cynthia, a 20percent partner in the five-person CYG partnership, has an outside basis of $23,000, including her $8,500 share of CYG debt. On January 1 of the current year, Cynthia sells her partnership interest to Roger for a cash payment of $16,000 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?

The PW Partnership's balance sheet includes the following assets immediately before it liquidates: 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. PW has no liabilities at the time of the liquidation. What is the amount and character of Pamela's recognized gain or loss?

Daniela is a 25percent partner in the JRD Partnership. On January 1, JRD makes a proportionate liquidating distribution of $20,000 cash and inventory with a $15,000 fair value (inside basis $5,000) to Daniela. JRD has no liabilities at the date of the distribution. Daniela's basis in her JRD Partnership interest is $21,000. What is the amount and character of Daniela's gain or loss from the distribution?

Daniela is a 25percent partner in the JRD Partnership. On January 1, JRD makes a proportionate distribution of $25,000 cash, inventory with a $17,400 fair value (inside basis $8,700), and accounts receivable with a fair value of $8,700 (inside basis of $13,050) to Daniela. JRD has no liabilities at the date of the distribution. Daniela's basis in her JRD Partnership interest is $28,050. What is Daniela's basis in the distributed inventory and accounts receivable?

Which of the following statements regarding liquidating distributions is true?

The SSC, a cash-method partnership, has a balance sheet that includes the following assets on December 31 of the current year: Susan, a one-third partner, has an adjusted basis of $90,000 for her partnership interest. If Susan sells her entire partnership interest to Emma for $100,000 cash, what is the amount and character of Susan's gain or loss from the sale?

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?

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 five years as an investment.

Barry has a basis in his partnership interest of $50,000 when the partnership distributes $60,000 in cash to Barry. As a result of the distribution, Barry reduces his basis in the partnership interest to $0, has a $60,000 basis in the cash received, and recognizes a gain of $10,000 on the distribution.

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

Which of the following statements is true regarding partnership operating distributions?

Catherine is a 30percent partner in the ACW Partnership, with an outside basis of $20,000. ACW distributes land with a basis of $12,000 and fair value of $18,000 to Catherine in complete liquidation of her interest. Catherine recognizes a capital loss of $2,000 on the distribution.