c-ch10 - Chapter C10 Special Partnership Issues Discussion...

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Chapter C10 Special Partnership Issues Discussion Questions C10-1 A current distribution is a distribution which does not terminate the partner's interest in the partnership nor is the payment one of a series of payments which is intended to terminate the partner's interest in the partnership. A liquidating distribution is made with the intention of terminating the partner's entire interest in the partnership either with this payment or with a planned series of payments including this one. The January distribution to Javier is the first in a series of distributions which will terminate his interest in the partnership and, therefore, is a liquidating distribution. p. C10-2. C10-2 The basis of property in the hands of the distributee partner is generally a carryover of the property's adjusted basis in the partnership's hands immediately before the distribution. However, the basis of all property distributed to a partner cannot exceed the distributee partner's basis in his partnership interest immediately before the distribution reduced by any cash or deemed cash payments (liability reduction) which she received as part of the distribution. Lia's basis will be $40,000 if the partnership's basis in the land prior to the distribution was $40,000 or more. Lia will take a carryover basis from the partnership's books if the partnership's basis for the parcel of land prior to the distribution was less than $40,000. pp. C10-4 through C10-7. C10-3 The basis of a single asset received in a liquidating distribution is determined by two factors: the basis of the distributed property in the partnership's hands and the distributee partner's basis in his partnership interest prior to the distribution. The total basis to the distributee partner of the assets received will generally equal the partner's basis in the partnership interest immediately prior to the distribution. Mariel's basis will be $60,000 in the land regardless of what the partnership's basis in the land was prior to its distribution. pp. C10-12 through C10-15. C10-4 Cindy's basis for the property she receives will be reduced to $4,000 from its $4,500 basis to the CDE Partnership since it is limited to Cindy's basis in her partnership interest before the distribution. Even though the property will be held as an investment by Cindy, the sale of the inventory would generate ordinary income for five years from the date of the distribution. The sale of the capital asset would generate long-term capital gain that is to most individual taxpayers taxed at a maximum 20% marginal tax rate. pp. C10-2 through C10-8. C10-5 The partnership's accounts receivable are probably not unrealized receivables because the partnership uses the accrual method of accounting. However, recapture potential under Secs. 1245 and 1250 are also unrealized receivables.
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c-ch10 - Chapter C10 Special Partnership Issues Discussion...

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