Chapter 12 Problems.docx - Practical Guide to Partnerships...

This preview shows page 1 - 3 out of 8 pages.

Practical Guide to Partnerships and LLCs—Problems Chapter 12 – Partnership Distributions Reading: Paragraphs 1201-1205. 1. How are “advances or drawings of money or property against a partner’s distributive share of income” treated? For tax purposes, such draws are treated as distributions made on the last day of the partnership’s taxable year. 2. W is a partner in the equal WXYZ partnership. At the beginning of the year, his basis in his partnership interest is $40,000. On Feb. 1, W takes a draw against earnings of $30,000. On June 1, the partnership pays off $60,000 of debt. Sept. 1, W gets a distribution of cash of $30,000 that is not a draw against earnings. The partnership’s income from the year is $200,000. What is the effect of each of these items on W’s basis? 3. A is a partner in the equal ABC partnership, and is distributed a note from the partnership for $30,000, payable by the partnership. A then sells the note for $27,000. A’s basis in the partnership when the note was distributed was $25,000. What are the tax effects to A? What would the tax effects have been if A was just distributed $30,000 cash instead? 4. If a partner is distributed encumbered property, what is the ordering in time of the following for tax purposes: (1) the assumption of the debt by the distributee partner, (2) the reduction in the distributee partner’s share of the partnership debt, and (3) the distribution of the property? 5. Partner D of the equal DEF partnership has a basis in her partnership interest of $7,000. The partnership distributes property to her with a FMV = $102,000, basis = $90,000, and an associated liability of $72,000. What is her basis in the partnership and the property after the distribution? W beginning basis: 40,000 2/1: 30,000 draw: no effect until end of year 6/1 pay off debt: no effect until end of year 9/1 distribution: (30,000) Basis before income/dist.: 10,000 partnership income: 50,000 6/1 debt: (15,000) 2/1 draw: (30,000) End of year basis: 15,000 On
© 2017 CCH Incorporated and its affiliates. All rights reserved.
Practical Guide to Partnerships and LLCs—Problems Partners share of liab: 24,000 Property: 90,000 Property distribution: (55,000) Ending basis: 0 Partner D will take a basis in the property of 55,000 and have an ending basis in the partnership of 0 “equity

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture