Exam 10: Dispositions of Partnership Interests and Partnership Distributions

Hot assets include assets except cash, capital assets and §1231 assets.

Daniela is a 25% partner in the JRD Partnership. On January 1, JRD distributes $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 JRD is $21,000. What is Daniela's basis in the distributed inventory and accounts receivable?

The partnership making an operating distribution will recognize gain or loss only when the partner that receives the distribution recognizes gain or loss.

Randolph is a 30% partner in the RD Partnership. On January 1, RD distributes $26,000 cash to Randolph in complete liquidation of his interest. RD has only capital assets and no liabilities at the date of the distribution. Randolph's basis in RD is $37,000. What is the amount and character of Randolph's gain or loss on the distribution?

Martha is a 40% partner in the MMM Partnership with an outside basis of $50,000. MMM distributes $40,000 cash and accrual basis accounts receivable with a basis and fair market value of $20,000. Martha does not recognize gain or loss on the distribution and takes a basis in the cash of $40,000 and a basis in the receivables of $10,000.

Which of the following statements regarding disproportionate distributions is false?

Victor is a 1/3 partner in the VRX partnership with an outside basis of $156,000 on January 1. Victor sells his partnership interest to Raj on January 1^st for $200,000 cash. The VRX Partnership has the following assets and no liabilities as of January 1: The equipment was purchased for $360,000 and the partnership has taken $90,000 of depreciation. The stock was purchased 7 years ago. What is the amount and character of Victor's gain or loss on the sale of his partnership interest?

A disproportionate distribution is a distribution in which the partner's share of the partnership's hot assets either increases or decreases as a result of the distribution.

The SSC Partnership balance sheet includes the following assets on December 31 of the current year: Which of SSC's assets are considered hot assets under §751(a)? Basis FMN Cash \ 180,000 \ 180,000 Accounts receivable -0- 60,000 Equipment (cost =\ 100,000 ) 40,000 50,000 Land 90,000 120,000 Total \ 310,000 \ 410,000

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

Shauna is a 50% partner in the SH Partnership. Shauna sells one-half of her interest to Kara for $60,000 cash. Just before the sale, Shauna's basis in her entire partnership interest is $150,000 including her $60,000 share of the partnership liabilities. SH's assets on the sale date are as follows: What is the amount and character of Shauna's gain or loss on the sale? Basis FMV Cash \ 80,000 \ 80,000 Inventory 60,000 180,000 Land held for investment Total \ 300,000 \ 360,000

Katrina is a one-third partner in the KYR partnership (calendar year-end). Katrina decides she wants to exit the partnership and receives a proportionate distribution to liquidate her partnership interest on January 1. The partnership has no liabilities and holds the following assets as of January 1: Katrina receives one-third of each of the partnership assets. She has a basis in her partnership interest of $110,000. What is the amount and character of any recognized gain or loss to Katrina? What is Katrina's basis in the distributed assets? Basis FMV Cash \ 180,000 \ 180,000 Accounts receivable -0- 240,000 Stock investment 75,000 120,000 Land Total \ 555,000 \ 900,000

The SSC Partnership balance sheet includes the following assets on December 31 of the current year: Susan, a 1/3 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? Basis FMN Cash \ 180,000 \ 180,000 Accounts receivable -0- 60,000 Land 90,000 120,000 Total \ 270,000 \ 360,000

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? Basis FMV Cash \ 10,000 \ 10,000 Unrealized receivables -0- 10,000 Total \ 10,000 \ 20,000

Riley is a 50% partner in the RF Partnership and has an outside basis of $56,000 at the end of the year prior to any distributions. On December 31, Riley receives a proportionate operating distribution of $6,000 cash and a parcel of land with a $14,000 fair value and an $8,000 basis to RF. What is Riley's basis in the distributed property?

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 $100,000 to Nadine as an operating distribution. NL's balance sheet as of January 1 is as follows: Basis FMV Cash \ 100,000 \ 100,000 Account receivable -0 100,000 Total \ 100,000 \ 200,000 What is the amount and character of Nadine's recognized gain or loss on the distribution?

Which of the following is true concerning a partner's basis in assets (other than money) distributed in an operating distribution?

Joan is a 30% 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?

Which of the following statements is false concerning partnership liquidating distributions?

Jaime has a basis in her partnership interest of $50,000 when the partnership distributes (in an operating distribution) two parcels of land to Jaime, each valued at $30,000. The basis in parcel A is $40,000 and the basis in parcel B is $20,000. Jaime allocates $20,000 of basis to parcel A and $30,000 of basis to parcel B. Basis is allocated based on the relative fair market values of the property according to §732(c).