disposal_and_at_risk_limits_solution

disposal_and_at_risk_limits_solution - $ 1,000 + Debt...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Topic: Disposal of a business with a suspended loss under the at-risk rules [Solution] Mr. Cheney had a $6,100 outside basis in his Alcott partnership. The basis equaled his $8,000 negative capital account plus his $14,100 share of Alcott’s liabilities. Because the liabilities were nonrecourse, Mr. Cheney could not include his share in his at-risk amount. Thus, his at risk amount was zero, and he had an $8,000 suspended loss because of the at-risk limitation. During the year Mr. Cheney sold his interest to another partner for $1,000 cash. Required : What does Mr. Cheney recognize from the sale of his partnership interest? Cash
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: $ 1,000 + Debt relief 14,100 Amount realized 15,100 Basis in partnership interest (6,100) Recognized gain 9,000 The recognized gain increased Mr. Cheneys at-risk amount to $9,000, thereby allowing him to deduct his $8,000 suspended loss under the at-risk limitation. The recognized gain $9,000 is reduced by the suspended loss $8,000. Mr. Cheney reports a realized gain of $1,000. This is not a coincidence; usually the difference between the partners basis & at risk amount is the partners share of nonrecourse debt. Therefore, the gain recognized must be at least as much as the excess of nonrecourse debt over basis....
View Full Document

This note was uploaded on 03/03/2010 for the course ACG 6845 taught by Professor Kelliher during the Spring '09 term at University of Central Florida.

Ask a homework question - tutors are online