Chichester_AC430_unit 6_ assignment

Chichester_AC430_unit 6_ assignment - C:95An existing...

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C: 9-5  An existing partner wants to contribute property having a basis less than its FMV for an additional interest in a partnership. a. Should he contribute the property to the partnership? He could contribute the property to the partnership tax-free; however Sec. 704(c) requires precontribution gains or losses to be allocated to the contributing partner. Also income and deductions that are reported in respect to the contributed property must be allocated to account for the difference between the property’s basis and FMV at the time of contribution. C:9-19 b. What are his other options? The partner could sell or lease the property to the partnership, sell the property to a third party and contribute the cash to the partnership, or sell the property to a third party who then contributes the property to the partnership. c. Explain the tax implications for the partner of these other options. If the partner sells the property to the partnership and the seller owns more than 50% of the partnership then ordinary income recognition is required. If the partner leases the property to the partnership then the partner retains the depreciation and other deductions with respect to the property. A sale of the property to a third party is taxed like any other sale and would have no special tax consequences. C:9-28 C: 9-7  Which of the following items can be deducted (up to $5,000) and amortized as part of a partnership’s organizational expenditures? a . Legal fees for drawing up the partnership agreement b. Accounting fees for establishing an accounting system c. Fees for securing an initial working capital loan d. Filing fees required under state law in initial year to conduct business in the state e. Accounting fees for preparation of initial short-period tax return f. Transportation costs for acquiring machinery essential to the partnership’s business g. Syndication expenses The only Items in this list that can be deducted and amortized as part of the organizational expenditures are: a, b, and d. C: 9-9  How will a partner’s distributive share be determined if the partner sells one-half of his or her beginning-of-the-year partnership interest at the beginning of the tenth month of the partnership’s tax year?
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The partner’s distributive share will equal the sum of his earnings for one-half of his beginning – of- the – year interest for the entire year and his earnings for the other one-half of his beginning – of – the – year interest for nine months, calculated on a daily basis. C: 9-25  Formation of a Partnership. Suzanne and Bob form the SB General Partnership as equal partners. They make the following contributions: Suzanne Cash $45,000 $ 45,000 Inventory (securities) 14,000 15,000 Bob Land 45,000 40,000 Building 50,000 100,000 The SB Partnership assumes the $80,000 recourse mortgage on the building that Bob contributes, and the partners share the economic risk of loss on the mortgage equally. Bob has claimed $40,000 in straight-line depreciation under the MACRS rules on the building. Suzanne is a stockbroker and contributed securities from her inventory. The partnership
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This note was uploaded on 11/14/2011 for the course AC 430 AC 430-01 taught by Professor Riese during the Spring '11 term at Kaplan University.

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Chichester_AC430_unit 6_ assignment - C:95An existing...

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