9 Chapter HW
Problem 9-26
a.
Fred recognizes ordinary income of $15,000. Ed recogizes $89,000 sectio n1231 gain,
this is because the net liability contribute exceeds Ed's basis.
b.
The partnership recognizes no gain or loss.
c.
Al Cash contibutions
15,000
Mortgage allocated
19,500
Basis of partnership interest
34,500
Bob -
A/R basis to Bob
Mortgage allocated
Basis of partnership interest
26,000
26,000
Clay -
Equipment basis to Clay
Mortgage allocated
Basis of partnership interest
13,000
19,500
32,500
Dave -
Land basis
Mortgage allocated
Basis of partnership interest
50,000
19,500
69,500
Ed -
Building basis
Mortgage contributed
Mortgage allocated
Tentative basis & gain recognized
Actual basis
Fred -
Services contributed
Mortgage allocated
Basis of partnership interest
d&e
Cash
A/R
Equipment
Land
Building
Org Expense
15,000
(130,000)
26,000
(89,000)
15,000
19,500
34,500
Basis
Book Value
15,000
15,000
20,000
13,000
15,000
50,000
15,000
15,000
150,000
15,000
15,000
f.
Building has no depreciation recap potention because Straight Line MACRS was used, if
the building is sold part or all of gain will be section 1250 gain taxed at 25%.
The equipment depreciation recap potential carries to partnership
g.
If Fred's profits interest had an ascertainable value the result is not changed, if there is no value,
at the time, Fred does not recognize income and the partnership has no org expense to amortize.
h.
Parnership -
Amount realized
Basis
Loss recognized
9,000
(50,000)
(41,000)
Dave -
FMV contributed
Less Adj basis
pre contribution loss
15,000
(50,000)
(35,000)
total loss
precontib loss
post contib loss
41,000
(35,000)
6,000
precontrib loss
add Dave's share of
post contr loss
Dave's distributive share
Othr Partners contributio -
Post loss
allocated to them
Problem 9-32
a&b
Parnership ord income:
Sales
COGS
Gross profit
Plus Section1245 gain
Less Ordinary expense
Depreciation
Guaranteed payment
Business interst
Meals & Entrmt (50%)
Parnership ord income:
Separate items:
Dividend income
tax exempt int income
section 1231 gain
net LTCG
STCL
investment interest income
charitable contrib
nondeductible M*E exp
nondeductible int on loan
c.
Beginning basis in partnership int
Add: Parnership ord income
Dividend income
tax exempt int income
section 1231 gain
Net LTCG
Less: Distributions
Reduction in partnership liab
STCL
Investment int expense
Charitable contribution
nondeductible M*E exp
nondeductible int on loan
Ending basis in partnership interest
35,000
900
35,900
5,100
Mark
Pamela
450,000
(210,000)
240,000
33,000
27,000
30,000
42,000
5,800
(104,800)
168,200
84,100
84,100
15,000
4,000
18,000
2,000
(9,000)
(9,200)
(5,000)
(5,800)
(2,800)
7,500
2,000
9,000
1,000
(4,500)
(4,600)
(2,500)
(2,900)
(1,400)
7,500
2,000
9,000
1,000
(4,500)
(4,600)
(2,500)
(2,900)
(1,400)
Mark
Pamela
150,000
150,000
84,100
84,100
7,500
7,500
2,000
2,000
9,000
9,000
1,000
1,000
(40,000)
(40,000)
(7,000)
(7,000)
(4,500)
(4,500)
(4,600)
(4,600)
(2,500)
(2,500)
(2,900)
(2,900)
(1,400)
(1,400)
190,700
190,700
Problem 9-38
a.
Special allocation could have economic effect in year 1 but not in year 2 or 3
because Diane does not have an obligation to repay neg capital account balances.
b.
This special allocation will have substancial economic effect in all three years.
c.
Special allocation will not effect in Year 2 or 3 because Diane will have negative capital account balance in each year.
Liability increases basis but does not increase capital account.