Exam 16: Dispositions of Partnership Interests and Partnership Distributions

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.

Randolph is a 30% 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 RD is $37,000. What is Randolph's basis in the distributed inventory and land?

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 VRX Partnership (a calendar year-end entity) has the following assets and no liabilities: Basis FMV Cash \ 27,000 \ 27,000 Accounts receivable -0- 18,000 Imventory 103,500 121,500 Equipment 270,000 337,500 Stock investment 67,500 96,000 Total \ 468,000 \ 600,000 The equipment was purchased for $360,000 and VRX has taken $90,000 of depreciation. The stock was purchased 7 years ago. What are VRX's hot assets for purposes of a sale of partnership interest?

Tyson is a 25% partner in the KT Partnership. On January 1, KT distributes $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 KT is $20,000. What is Tyson's basis in the distributed land?

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

A disproportionate distribution of hot assets is treated as though the partnership distributes a proportionate share of hot assets to the partner and then the partner sells those hot assets back to the partnership at fair market value in exchange for a portion of the assets actually received in the distribution.

Esther and Elizabeth are equal partners in the EE Partnership. The partners formed the partnership seven years ago by contributing cash. Prior to any distributions, the partners each have a $40,000 basis in their partnership interests including their share of partnership liabilities. On December 31, EE partnership repays $50,000 of debt. What is the amount and character of Esther's recognized gain or loss? What is Esther's remaining basis in EE?

Joan is a 1/3 partner in the PDJ Partnership. 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 FMV Cash \ 27,000 \ 27,000 Accounts receivable -0- 18,000 Imventory 103,500 121,500 Equipment 270,000 337,500 Stock investment 67,500 96,000 Total \ 468,000 \ 600,000 What is the amount and character of Joan's gain or loss on the sale?

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

Zayde is a 1/3 partner in the ARZ partnership with an outside basis of $156,000 on January 1. Zayde sells his partnership interest to Thomas on January 1^st for $180,000 cash. The ARZ Partnership has the following assets and no liabilities as of January 1: Liablities and capital: Liabilities \ 120,000 Capital-Marty 92,000 -Barry 138,000 Total \ 350,000 The equipment was purchased for $360,000 and the partnership has taken $90,000 of depreciation. The stock was purchased 3 years ago. What is the amount and character of Zayde's gain or loss on the sale of his partnership interest?

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: Liablities and capital: Capitar-Tatia \ 33,000 -Rihanna 33,000 -Quinn 33,000 Total \ 99,000 Assets: Basis FMV Cash \ 110,000 \ 110,000 Stock (imvestment) 240,000 110,000 Land 55,000 110,000 Total \ 405,000 \ 330,000 What is the amount and character of Nadine's recognized gain or loss on the distribution?

When determining a partner's gain on sale of his partnership interest, the selling partner must include her share of partnership debt in the amount realized.

Tyson, a one-quarter partner in the TF Partnership, receives a proportionate distribution to liquidate his partnership interest on January 1. The distribution consists of $70,000 cash and inventory with a fair value of $40,000 (inside basis is $22,000). Tyson's outside basis is $105,000 including his $10,000 share of TF's liabilities. What is the amount and character of Tyson's recognized gain or loss? What is Tyson's basis in the distributed inventory?

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

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

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

Unrealized receivables include accounts receivable for which of the following partnerships?

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

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