1 Tab-1-Distributions
4e5335c056cbc5e6dcc75607430babe27bb00139.xlsx
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1 2 50% Partner's basis before distribution 3 Cash distributed to partner 4 Land distributed to partner 5 Partnership's Basis before distribution 6 FMV of land on date of distribution 7 Gain Recognized by Partnership 8 Loss Recognized by Partnership 9 Gain Recognized by Partner 10 Loss Recognized by Partner 11 Partner's basis in land received 12 Remaining Basis in Partnership Interest 13 Partnership Liquidating Dist. 14 50% Partner's basis before distribution 15 Cash distributed to partner 16 Land distributed to partner 17 Partnership Basis before distribution 18 FMV of land on date of distribution 19 Gain Recognized by Partnership 20 Loss Recognized by Partnership 21 Gain Recognized by Partner 22 Loss Recognized by Partner 23 Partner's basis in land received 24 Remaining Basis in Partnership Interest 25
Taxpayer Hart, Bart or Day takes distributions from a partnership (first a non-liquidating distribution & then a liquidating distribution). Partnership Non-Liquidating Dist. Hart Bart Day Txt Code
$9,000 5,000 $9,000 5,000 7,000 10,000 $50,000 25,000 15,000 20,000
731 731 731 731 732 733 b b a 1 a 2 a 1, 2
11-5 11-5
Hart
$9,000 5,000
Bart
$9,000 5,000 7,000 10,000
Day
$50,000 25,000 15,000 20,000
11-9 11-10 11-11 731 731 731 731 732 b b a 1 a 2 b
N/A
Corporate Distribution-nonliquidating
26 This does not involve a stock redemption. 27 50% Shareholder's Basis before distribution 28 Cash distributed to shareholder 29 Land distributed to shareholder 30 Corp Basis in land before distribution 31 FMV of land on date of distribution 32 Income Recognized by Corporation 33 Income Recognized by Shareholder 34 Shareholder basis in land received 35 Remaining Basis in Corporate Stock
Hart
$9,000 5,000
Bart
$9,000 5,000 7,000 10,000
Day
$50,000 25,000 15,000 20,000
311 301 c 301 d
N/A
Steps for Partnership Distribution. Assume no hot asset.
1 2 3 4 5 6 7 Partner's outside basis of partnership interest (Include debt) Less: Cash distributed to Partner (debt relief is like cash) Gain recognized by Partner (Line 2-Line 1) Partner's remaining outside basis (Line 1-Line 2) Partnership's inside basis - Other property distribution Partner's basis for other property (< Line 4 or Line 5) Partner's outside basis (Line 4 - Line 6)
Tab-2-Sale, Redemption
4e5335c056cbc5e6dcc75607430babe27bb00139.xlsx . Text Tax Law 701, 704
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Sale of Partnership Interest or Retirement
Partnerships do not pay income taxes. Partners report their shares of partnership income. The person who earns income should be the person to pay tax on that income. January 1, 2011 Part 1. ABC Partnership Tax Book Cash $100,000 $100,000 Land 30,000 50,000 Total Assets $130,000 $150,000 Capital, A $30,000 $50,000 Capital, B 50,000 50,000 Capital, C 50,000 50,000 Total Equity $130,000 $150,000 A, B & C started the partnership with assets shown above on 1-1-2011.
A invested land (A's basis: $30,000, FMV: $50,000). B & C each invested cash of In $50,000. 2011, partnership had net income of $60,000, which was allocated & distributed equally.
1.723-1
721, 722 1.721-1(a), 1.722-1
On 1-1-2012, B receives a liquidating distibution of the land.
What is the tax impact of this distribution? Read 1.704-4(a)
11-09 704( c)(1)(B)(i) 1.704-4(a) 10-27
Part 2. Ann-Beth-Carla Partnership (Cash Basis). Receivables balance is $0.
Cash Land IBM stock Totals Basis $20,000 10,000 3,000 $33,000 FMV $20,000 46,000 9,000 $75,000 Liabilities Capital, Ann Capital, Beth Capital, Carla Totals Basis $15,000 6,000 6,000 6,000 $33,000 FMV $15,000 20,000 20,000 20,000 $75,000
11-22 752(a), (d) 705, 752(a) 741, 1.741-1(a)
Ann sells her partnership interest to Dana for cash of $20,000.
1 2 3 4 5 6
Dana is admitted to partnership and assumes her share of the liabilities. What is Ann's selling price? What was Ann's basis in the partnership interest? What is the total amount of gain to be reported by Ann? Capital Gain? What is the nature of that gain?
Ordinary Income?
Is a basis adjustment allowed here? Ignore 1-5, Ann takes a liquidating distribution of the cash of $20,000. Capital Gain reported by Ann? What is the impact of this distribution?
754, 743(b)
731 741, 742, 1011+
Tab-3-Sale, Redemption
4e5335c056cbc5e6dcc75607430babe27bb00139.xlsx . Text Tax Law
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Sale of Partnership Interest or Retirement
Part 3. Ann-Beth-Carla Partnership (Cash Basis).
Cash Accounts Rec. for Audit Land IBM stock Totals Basis $21,000 0 9,000 3,000 $33,000 FMV $21,000 30,000 18,000 6,000 $75,000 Liabilities Capital, Ann Capital, Beth Capital, Carla Totals Basis $15,000 6,000 6,000 6,000 $33,000 FMV $15,000 20,000 20,000 20,000 $75,000
Ann sells her partnership interest to Dana for cash of $20,000.
1 2 3 4
11-23 752(d) 705, 752(a)
Dana is admitted to partnership and assumes her share of the liabilities. What is Ann's selling price? What was Ann's basis in the partnership interest? What is the total amount of gain to be reported by Ann? Ordinary Income? What is the nature of that gain?
Capital Gain?
11-26 751
Ex-35 741 1.751-1(g) ex1
5 6
Is a basis adjustment allowed here?
Ignore 1-5, Ann takes a liquidating distribution of the cash of $20,000. Impact of this distribution?
Ordinary Income Capital Gain
754, 743(b)
751(b) 732(b)
7
Ann takes a liquidating distribution of one-third of each asset, less $5,000 for debt.
Cash Acct. Rec. for Audit Land IBM stock Totals Basis $21,000 0 9,000 3,000 $33,000 FMV $21,000 30,000 18,000 6,000 $75,000 Distribute (1/3) $2,000 10,000 6,000 2,000 $20,000 Her Basis $2,000 0 3,000 1,000 $6,000
This is a proportionate distribution.
8 9
Ann takes a liquidating distribution of $20,000 of unrealized receivables. Other partners are treated as collecting receivables of $10,000.
Use Data in Part 3. Assume Ann retires from the partnership and receives Cash of $40,000. See example 23. Page 11-18. Cash of $15,000 is for her share of non-hot assets (FMV). Cash of $25,000 is for Receivable of $10,000 and for goodwill.
735, 1.735-1(a)