Chap_20 - Chapter 20 Partnerships—Distributions Sales and Exchanges ©2008 CCH All Rights Reserved 4025 W Peterson Ave Chicago IL 60646-6085 1

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Unformatted text preview: Chapter 20 Partnerships—Distributions, Sales, and Exchanges ©2008 CCH. All Rights Reserved. 4025 W. Peterson Ave. Chicago, IL 60646-6085 1 800 248 3248 www.CCHGroup.com CCH Federal Taxation Comprehensive Topics 2 of 47 1. Distributions—General Effect on Partners 2. Distributions—General Rules Code Sections 731 to 733 3. Proportionate Distributions—Example 4. Selling a Partnership Interest—Effect on Selling Partner 5. Selling a Partnership Interest—Effect on Partnership 6. Selling a Partnership Interest—Example 7. Selling a Partnership Interest with Hot Assets—Example 8. Basic Partnership Tax Accounting—Outside Basis, Inside Basis, and Capital Account 9. Basic Partnership Tax Accounting—Example 1 (Formation) Chapter 20 Exhibits Chapter 20, Exhibit Contents A CCH Federal Taxation Comprehensive Topics 3 of 47 10. Basic Partnership Tax Accounting—Example 2 (Profit Allocation) 11. Basis Adjustments Attributable to Partnership Distributions—Sec. 734(b) 12. Death or Retirement of a Partner 13. Income in Respect of a Decedent Chapter 20 Exhibits Chapter 20, Exhibit Contents A CCH Federal Taxation Comprehensive Topics 4 of 47 Distributions—General Effect on Partners How is “amount distributed” to owners computed? Cash + debt relief [i.e., for purposes of determining gain, only cash + debt relief are subject to capital gains. Other property received by a partner is tax-free.] What is the owners’ tax treatment for the “amount distributed?” Cash + debt relief: Tax-free up to outside basis; Capital gain to a partner on the excess of cash or debt relief in excess of outside basis. (Loss is never recognized.) Other property: Tax-free. Chapter 20, Exhibit 1a CCH Federal Taxation Comprehensive Topics 5 of 47 What is the basis of property distributed to an owner? Same as the partnership’s inside basis. [However, if a partner’s outside basis is less than the partnership’s inside basis in property distributed to a partner, then the partner’s basis of property received is taken from his outside basis, not from the partnership’s inside basis. This makes sense, given that a partner’s outside basis must be reduced by the “amount” of distributions and that it cannot be negative] Chapter 20, Exhibit 1b Distributions—General Effect on Partners CCH Federal Taxation Comprehensive Topics 6 of 47 Distributions—General Rules Code Sections 731 to 733 The rules indicated below assume that the partnership DOES NOT make a disproportionate distribution of the Code Sec. 751 “hot” assets. What is a distribution? A distribution is a transfer of value from the P/S to a partner in reference to his interest in the partnership. A distribution may be in the form of money, debt relief, or other property. Any decrease in a partner’s allocable share of P/S debt is treated as a distribution of money. This can result from payment of principal by the P/S on its debt. Also, a draw against a partner’s share of partnership income is a distribution....
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This note was uploaded on 11/24/2010 for the course TXX 5762 taught by Professor Allen during the Spring '10 term at Nova Southeastern University.

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Chap_20 - Chapter 20 Partnerships—Distributions Sales and Exchanges ©2008 CCH All Rights Reserved 4025 W Peterson Ave Chicago IL 60646-6085 1

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