PLLC_Chapter8_Solutions.pdf - Practical Guide to...

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Practical Guide to Partnerships and LLCs—Instructor’s Guide Solutions1Chapter 8 – Other Limitations on Partnership AllocationsReading:Paragraph 801.1.Partner A owns a 10% interest in the ABCD partnership.If partner A sells herpartnership interest, will the partnership taxable year have to close on that date?If Aonly sells ½ of her interest in the partnership, will the partnership taxable year have toclose on that date?Is there any effect on the timing of the partnership income to A ifthere is a sale of only part, versus all, of A’s partnership interest?
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2.What are the two methods of income allocation with respect to the income of apartner who sells all or part of his partnership interest?
Practical Guide to Partnerships and LLCs—Instructor’s Guide Solutions23.On September 30 Partner C buys ½ of partner A’s interest in the equal AB calendar-year partnership, so A and C each own 25% after the sale.For the year, thepartnership earns income of $2,000 a month for January through August, and $6,000a month for September through December.How much income will A and C eachhave from the partnership under (a) the interim closing method and (b) the prorationof partnership income method?
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