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Partnership Tax Scenario Solution (FULL) - Angela, Bob,...

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Angela, Bob, Charlie & Daisy PartnershipAnalysis of Partnership BasisAngelaBobCharlieDaisy25%25%25%25%Initial Contribution:BasisCCash80,000 Equipment42,000 Vehicle15,000 Building60,000 FMV80,000 80,000 80,000 80,000 Liabilities on contributed assetsB0 70,000 9,000 90,000 Value of 1/4 interest in partnershipA80,000 80,000 80,000 80,000 Partnership Basis in Transferred Assets:C80,000 42,000 15,000 60,000 Realized Gain:FMV of partnership interest receivedA80,000 80,000 80,000 80,000 Less: Transferred basisC(80,000)(42,000)(15,000)(60,000)Plus: Net equipment liability assumedB x (100% - %)0 52,500 0 0 Plus: Net vehicle liability assumedB x (100% - %)0 0 6,750 0 Plus: Net building liability assumedB x (100% - %)0 0 0 67,500 Realized gain0 90,500 71,750 87,500 Initial Outside Basis:Transferred basisC80,000 42,000 15,000 60,000 Less: debt reliefB0 (70,000)(9,000)(90,000)Plus: share of non-recourse debtEquipment loanL = B x %17,500 17,500 17,500 17,500 Vehicle loanU = B x %2,250 2,250 2,250 2,250 Building loanF = B x %22,500 NO22,500 22,500 22,500 D122,250 14,250 48,250 12,250 Outside Basis in Partnership:Initial outside basis122,250 14,250 48,250 12,250 Operations loan$120,000 H60,000 0 60,000 0Furniture loan$60,000 G20,000 0 20,000 20,000 Gain on sale of vehicle$107,750 9,000 9,000 80,750 9,000 Less: Vehicle loanU(2,250)(2,250)(2,250)(2,250)209,000 21,000 206,750 39,000 Plus: Interest income$12,000 3,000 3,000 3,000 3,000 Plus: Dividend income$10,000 2,500 2,500 2,500 2,500 Less: Cash distribution($2,000)(2,000)(2,000)(2,000)(2,000)Less: Long-term capital loss($4,000)(4,000)(4,000)(4,000)(4,000)Outside basis in partnershipY208,500 20,500 206,250 38,500 Less: Ordinary business loss($120,000)XX(30,000)(30,000)(30,000)(30,000)Outside basis in partnership178,500 (9,500)176,250 8,500 Loss limitation (carryforward to fys)YY0 5,000 0 0 Outside basis in partnershipE178,500 (4,500)176,250 8,500 At-Risk Limitation:Outside basis in partnership before net lossY208,500 20,500 206,250 38,500 Less: Non-recourse debtEquipment loanL(17,500)(17,500)(17,500)(17,500)Building loanF(22,500)(22,500)(22,500)(22,500)Operations loanH(60,000)0 (60,000)0 Furniture loanG(20,000)0 (20,000)(20,000)At-risk amountI88,500 (19,500)86,250 (21,500)Outside Basis in Partnership: (cont'd)At-risk limitationCompare I to XX (only positive numbers)0 0 0 0 Less: Basis limitationYY (only if at-risk limitation is positive)0 0 0 0 Additional at-risk limitationJ0 19,500 0 21,500 Ordinary business loss takenXX+YY(30,000)(25,000)(30,000)(30,000)Corrected ordinary business loss(30,000)0 (30,000)0 Outside basis before limitationsY208,500 20,500 206,250 38,500 Corrected outside basisZZ178,500 20,500 176,250 38,500 Ordinary loss carryforwardXX+MM0 (30,000)0 (30,000)Daisy Sells Out for $15,000:Sales Price15,000 Less: Outside basis in partnershipZZ(38,500)Plus: Debt reliefLL=X+F+H(assumed by Erick)0 0 0 60,000 Recognized gainK36,500 Hot Gain(Total FMV - Basis of hot assets)12,000 Times: Percentage share25%Ordinary incomeL3,000 Capital gainK-L33,500

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Term
Spring
Professor
armstr
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