Exam 15: Dispositions of Partnership Interests and Partnership Distributions

If the partnership has hot assets at the time a partnership interest is sold,the selling partner must allocate a portion of the sale proceeds to these assets and recognize ordinary income (loss).

Kathy is a 25% partner in the KDP Partnership and receives a parcel of land with a fair value of $150,000 (inside basis of $100,000)in complete liquidation of her partnership interest.Kathy's outside basis immediately before the distribution is $200,000.KDP currently has a §754 election in effect and has no hot assets or liabilities.What is KDP's special basis adjustment from the distribution?

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

Joan is a 1/3 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 $75,000.On January 1,Joan's basis in PDJ is $57,000.PDJ generates $60,000 of ordinary income and $9,000 of tax-exempt income during the first four months of the year.PDJ has the following assets and no liabilities at the sale date: Basis Fair Market Value Cash \ 45,000 \ 45,000 Lard held For irvestrient \ 45,000 \ 90,000 What is the amount and character of Joan's gain or loss on the sale?

Marcella has a $65,000 basis in her 50% 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?

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:   Assets Basis FMV Cash \ 110,000 \ 110,000 Stock (investiment) 240,000 110,000 Land Totals \ 405,000 \ 330,000 Liabilities and capital: Capital -Daniel \ 135,000 - Alexandra 135,000 -Travis Totals 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?

In which type of distribution may a partner recognize a loss on the distribution?

Ted is a 30% partner in the TDW Partnership with an outside basis of $20,000.TDW distributes $15,000 of cash in complete liquidation of Ted's interest.Ted recognizes a capital loss of $5,000 on the distribution.

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 her JRL partnership interest is $28,000.What is the amount and character of Jessica's gain or loss from the distribution?

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

Tyson is a 25% partner in the KT Partnership.On January 1,KT makes a proportionate 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 Tyson's basis in the distributed land?

Daniela is a 25% partner in the JRD Partnership.On January 1,JRD makes a proportionate 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 $0)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 Daniela's basis in the distributed inventory and accounts receivable?

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: Basis FMV Inventory \ 40,000 \ 60,000 Land Total Brooke, capital \ 20,000 Penelope, capital 20,000 Amanda, capital Total 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?

Operating distributions completely terminate a partner's interest in the partnership.

Scott is a 50% partner in the LS Partnership.Scott has a basis in his partnership interest of $84,000 at the end of the current year,prior to any distribution.On December 31,Scott receives an operating distribution of $9,000 cash and a parcel of land with a $21,000 fair market value and a $12,000 basis to the partnership.LS has no debt or hot assets.What is the amount and character of Scott's recognized gain or loss? What is Scott's basis in the distributed property? What is Scott's ending basis in his partnership interest?

Kathy is a 25% partner in the KDP Partnership and receives $120,000 cash in complete liquidation of her partnership interest.Kathy's outside basis immediately before the distribution is $160,000.KDP currently has a §754 election in effect and has no hot assets or liabilities.Which of the following statements is true?

Tatia's basis in her TRQ partnership interest is $33,000.Tatia receives a distribution of $22,000 cash from TRQ in complete liquidation of her interest.The three partners in TRQ share profits,losses,and capital equally.TRQ has the following balance sheet: Assets Basis FMV Cash \ 22,000 \ 22,000 Stock (investiment) 11,000 22,000 Land Totals \ 99,000 \ 66,000 Liabilities ard capital: Capital - Tatia \ 33,000 -Rihanna 33,000 -Quinn Totals a.What is the amount and character of Tatia's recognized gain or loss? What is the effect on the partnership assets? b.If TRQ has a §754 election in place,what is the amount and sign (positive or negative)of the special basis adjustment?

Brian is a 25% partner in the BC Partnership.On January 1,BC distributes $20,000 cash and land with a $16,000 fair value (inside basis $8,000)to Brian.BC has no liabilities at the date of the distribution.Brian's basis in his BC partnership interest is $16,000.What is the amount and character of Brian's gain or loss on the distribution?

A partner that receives cash in an operating distribution recognizes gain if the cash distributed exceeds the partner's outside basis in the partnership immediately before 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.