Exam 10: Special Partnership Issues

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?

If the transferor partner receives payment for his or her interest in the partnership's Sec. 751 assets, he or she must recognize ordinary income no matter how the transaction is structured.

A partnership terminates for tax purposes

A partner's holding period for property distributed as a current distribution begins on the date of distribution.

Under Sec. 751, unrealized receivables include potential Section 1245 or 1250 recapture on the partnership's depreciable property.

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

Patrick purchased a one-third interest in the PPP partnership for $600,000. At the time of the purchase, the partnership had a 754 election in effect and its only asset was land with a basis of $1,500,000. This year, PPP sells the land for $1,800,000. What is Patrick's recognized share of the gain on the sale of the land?

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?

When must a partnership make mandatory basis adjustments?

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.

Identify which of the following statements is true.

Identify which of the following statements is true.

Identify which of the following statements is true.

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

Identify which of the following statements is true.

Identify which of the following statements is false.

The Principle Limited Partnership has more than 300 partners and is publicly traded. The Principle was grandfathered under the 1987 Tax Act and has consistently been taxed as a partnership. In the current year, The Principle Limited Partnership will continue to be very profitable and will continue to pay out about 30% of its income to its owners each year. The managing partners of The Principle want to consider the firm's options for taxation in the current and later years.

The STU Partnership, an electing Large Partnership, has no passive activities and reports the following transactions for the year: net long-term capital losses $50,000, Sec. 1231 gain $60,000, ordinary income $20,000, charitable contributions $15,000, and tax-exempt income $2,000. How much will be reported as long-term capital gains to its partners?

Ed receives a $20,000 cash distribution from the EV Partnership, which reduces his partnership interest from one-third to one-fourth. The EV Partnership is a general partnership that uses the cash method of accounting and has substantial liabilities. EV's inventory has appreciated substantially since it was purchased. What issues should Ed consider with regard to the distribution?

The AB, BC, and CD Partnerships merge into the ABCD Partnership. AB (owned by Austin and Ben)contributes assets worth $100,000. BC (owned by Ben and Charlie)contributes assets worth $200,000. CD (owned by Charlie and Dennis)contributes assets worth $300,000. The capital and profits interest in ABCD is owned by: Austin, 10%; Ben, 30%; Charlie, 25%; and Dennis, 35%. ABCD Partnership is a continuation of