Chapter 14 problemsetSTU - Chapter 14 Problem Set CH14PS#1...

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Chapter 14 Problem Set CH14PS #1 – Related party limits (p 248 #2) Partnership CD is owned equally by C and D. C sells an asset to CD and recognizes a $1,000 loss on the sale. 1. Will the loss be disallowed under Section 707(b)(1)? Explain. 2. What difference would it make if C’s father, F, sells an asset to CD and recognizes a $1,000 loss? Explain. CH14PS #2 Partner D of the equal DEF partnership contributes property (FMV = $100,000, basis = $60,000) to the partnership. One year later, the partnership distributes $50,000 cash to partner D. How is the original contribution and the later distribution treated if it is not a disguised sale? How are they treated if it is a disguised sale? CH14PS #3 Suppose Joe contributes land (basis = $40,000, FMV = $50,000) to a partnership in exchange for a partnership interest and three years later the partnership distributes the land to Susan (at the time of the distribution the land’s basis = $40,000, and FMV = $70,000). The land is a capital asset to Joe and the partnership, but an ordinary asset to Susan. Joe and Susan are both partners in the partnership. a. If Joe owns 25% and Susan owns 60% of the partnership at the time of the distribution, how much gain will Joe have to recognize, what will its character be, what will be Joe’s basis in his partnership interest, and what is Susan’s basis in the property (assume Susan’s basis in the partnership interest before the distribution is $100,000)? b. Would your answer be any different if Susan only owned 40%? c. What would your answer be if Susan owned 40% and the FMV at the time of the

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