Partnerships Chapter 2

Partnerships Chapter 2 - PARTNERSHIPS Chapter 2 Click to...

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon
Click to edit Master subtitle style 1/21/11 PARTNERSHIPS Chapter 2
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
1/21/11 INTRODUCTION Best thing to do is work through EVERY one of the examples in the textbook. 22
Background image of page 2
1/21/11 Formation of a Partnership No tax consequences on putting property into a partnership Principal requirement is that “ property ” be contributed Property includes the following: Money Goodwill Intangible service assets Accounts receivable Patents Loans NOT services A partner contributing services must recognize income “Control” is not required immediately after the exchange (as in Section 33
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
1/21/11 General Rules and Code Sections Section 721(a) Non-recognition of gain or loss on contribution of property by either party (partner or partnership) Section 722 Outside Basis is partner’s basis at the start of the partnership Money PLUS: adjusted basis of property to contributing partner at time of contribution Section 723 Inside basis - Basis of property to partnership Adjusted basis of property contributed 44
Background image of page 4
1/21/11 General Rules and Code Sections Section 724 If partnership sells contributed property and recognizes a gain… Gain is the same character that the contributing partner would recognize Section 1223 Holding period carries over to the partnership Except when cash or ordinary income assets are contributed Section 704(c)(1)(A) Pre-contribution gain or loss associated with property cannot be allocated to another property when the property is disposed of Regulations 1.704-1(b)(2)(iv)(b)-(d),(F),(H) 55
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
1/21/11 Revenue Ruling 99-5 Illustrates 2 separate situations where a single owner entity (LLC) admits a partner SITUATION ONE A sells 50% interest in the LLC for $5,000 to B A is treated as selling a 50% interest in each asset to B A recognizes a gain or loss from the sale of 50% of each asset to B (Sec. 1001) Conversion of the entity to a partnership results in no gain or loss (Sec. 721 (a) B’s basis is equal to $5,000 (Sec. 722) A’s basis will be equal to 50% of the presale basis in each asset ( Sec. 722) Adjusted basis of property to partnership (Sec. 723) Equal to adjusted basis in the hands of A and B immediately before the sale 66
Background image of page 6
1/21/11 Revenue Ruling 99-5 Illustrates 2 separate situations where a single owner entity (LLC) admits a partner SITUATION TWO B contributes $10,000 to the LLC in exchange for a 50% ownership interest A is treated as contributing all the assets B is treated as contributing all the cash no gain or loss for either party (Sec. 721) Partners’ Basis (Sec. 722) B’s basis is equal to $10,000 A’s basis is equal to the property contributed Adjusted basis of property to partnership (Sec. 723) 77
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
1/21/11 Problem Page 36(a) 88 Partner A Partner B Partner C Partner D Gain realized $70,000 $40,000 Land $30,000 Goodwill $50,000 $20,000 Equipment $5,000 Installment Note $25,000 Inventory $50,000 $35,000 Building $30,000 Receivables $15,000 Loss on Land $0 Gain recognized (Section 721) $0 $0 $0 $0 Basis (Section 722) $30,000 $50,000 $50,000 $100,000 Holding Period Long-term
Background image of page 8
Image of page 9
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/20/2011 for the course ACC 617 taught by Professor Staff during the Fall '08 term at Kentucky.

Page1 / 53

Partnerships Chapter 2 - PARTNERSHIPS Chapter 2 Click to...

This preview shows document pages 1 - 9. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online