Exam 10: Special Partnership Issues

The CHS Partnership's balance sheet presented below is prepared on a cash basis at September 30 of the current year. Cindy withdraws from the partnership under an agreement whereby she takes one-third of each of the three assets and assumes $10,000 of the notes payable.Her basis for the partnership interest before any distribution is $25,000.What gain/loss should she report for tax purposes?

If a partner dies,his or her tax year closes

Sean,Penelope,and Juan formed the SPJ partnership by each contributing assets with a basis and fair market value of $200,000.In the following year,Penelope sold her one-third interest to Pedro for $225,000.At the time of the sale,the SPJ partnership had the following balance sheet: Shortly after Pedro became a partner,SPJ sold the land for $475,000.What are the tax consequences of the sale to Pedro and the partnership (1)assuming there is no Section 754 election in place,and (2)assuming the partnership has a valid Section 754 election?

Identify which of the following statements is true.

Joshua is a 40% partner in the XY Partnership when he sells his entire interest to Stanley for $60,000 cash.At the time of the sale,Joshua's basis is $36,000,which includes his $10,000 share of partnership liabilities.The partnership has no Sec.751 assets.Calculate Joshua's gain or loss on the sale.

Identify which of the following statements is false.

Eicho's interest in the DPQ Partnership is terminated when her basis in the partnership is $70,000.She receives a liquidating distribution of $20,000 cash and inventory with a $24,000 basis and a $40,000 FMV.She also receives,as part of the distribution,a desk that has a $100 basis and a $200 FMV to the partnership.What is her gain or loss,and what is her basis in the items received?

The Internal Revenue Code includes which of the following assets in the definition of Sec.751 properties?

Becky has a $24,000 basis in her partnership interest.She receives a current distribution of $4,000 cash,unrealized receivables with a basis of $12,000 and an FMV of $16,000,and land held as an investment with a basis of $3,000 and an FMV of $8,000.The partners' relative interests in the Sec.751 assets do not change as a result of the current distribution.The basis of her partnership interest following the distribution is

John has a basis in his partnership interest of $30,000.He receives a current distribution of $6,000 cash,unrealized receivables (FMV $11,000,basis $10,000),inventory (FMV $8,000,basis $4,000),and investment land (FMV $7,000,basis $6,000).The partners' relative interest in the Sec.751 assets do not change as a result of the current distribution.His basis in the land is

The AB Partnership has a machine with an FMV of $25,000 and a basis of $20,000.The partnership has taken an $8,000 depreciation on the machine.The unrealized receivable related to the machine is

The limited liability company (LLC)has become a popular business form because of its limited liability protection for its owner.The S corporation also provides limited liability protection for its owner.What advantages does an LLC provide that are not available with an S corporation?

When must a partnership make mandatory basis adjustments?

Rod owns a 65% interest in the RRR Partnership,a general partnership,which he sells to the two remaining partners - Roger and Regis.The three partners have agreed that Rod will receive $160,000 in cash from the sale.Rod's basis in the partnership interest before the sale is $125,000,which includes his $35,000 share of partnership recourse liabilities.The partnership has assets with a $310,000 FMV and a $210,000 adjusted basis.What issues should Rod,Roger,and Regis consider before this sale takes place?

Ted King's basis for his interest in the Troy Partnership is $24,000.In complete liquidation of his interest,King receives cash of $4,000 and real property (not a Sec.751 asset)having an FMV of $40,000.Troy's adjusted basis for this realty is $15,000.Section 736 does not apply.King's basis for this realty is

Identify which of the following statements is true.

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?

Bart has a partnership interest with a $32,000 basis.He receives a current distribution of $6,000 cash,unrealized receivables (FMV $9,000,basis $10,000),inventory (FMV $8,000,basis $4,000),investment land (FMV $7,000,basis $4,000),and building (FMV $20,000,basis $8,000).No depreciation recapture applies with respect to the building.The partners' relative interests in the Sec.751 assets do not change as a result of the current distribution.Bart's basis in the building is

The XYZ Partnership owns the following assets on December 31: A partner has a 20% interest with a basis of $6,000 in XYZ before receiving a liquidating distribution of $10,000 cash.XYZ Partnership has no liabilities.His recognized gain is