C12-Chp-11-1A-Ptshp-Distributions-2012

C12-Chp-11-1A-Ptshp-Distributions-2012 - Chapter 11A....

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Chapter 11A. Partnership. Distributions. C10-Chp-11-1A-Ptshp-Distributions-2010 Edited 2010-0221 Howard Godfrey, Ph.D., CPA Professor of Accounting Copyright 2010
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Note to student: This chapter has some very important basic rules which are pretty simple and easy to learn, as well as some more complex rules. The key is to first learn the basic rules and then add the others as you can. This chapter can be overwhelming. You can avoid being overwhelmed by concentrating on the simple stuff and mastering it first. (Homework)
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1. Determine the amount and character of gain or loss a partner recognizes in a nonliquidating partnership distribution. 2. Determine the partner’s basis of assets received in a nonliquidating partnership distribution. 3. Identify the partnership's Sec. 751 assets. 4. Determine the tax implications of a sale or a cash distribution when the partnership has Sec. 751 assets. 5. Determine the amount and character of gain or loss a partner recognizes in a liquidating partnership distribution. 6. Determine the partner’s basis of assets received in a liquidating distribution. 7. Determine the amount and character of the gain or loss recognized when a partner retires from a partnership or dies. 8. Determine whether a partnership has terminated for tax purposes. 9. Understand the effect of optional and mandatory basis adjustments. 10. Determine the appropriate reporting for the income of an electing large partnership.
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1. Determine the amount and character of gain or loss a partner recognizes in a nonliquidating partnership distribution.
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5 A liquidating distribution is one distribution or a series of distributions that terminates a partner's entire interest in the partnership. All other distributions, including those that substantially reduce a partner's interest, are governed by the non-liquidating distribution rules. [i.e. current distribution]
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6 Recognition of Gain. A current distribution that does not involve Sec. 751 assets results in no recognition of loss by Ptshp. Partners recognize gain only if they receive money in excess of basis. Here, money includes cash, deemed cash from reductions in a partner's share of liabilities and the FMV of marketable securities if the securities. See Sec. 731(a),(b),(c)
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7 Nonliquidating Distributions . While a current distribution causes gain or loss to be recognized only in the conditions listed above, the distribution may trigger recognition of previously unrecognized pre-contribution gain or loss. This recognition of the remaining precontribution gain or loss can occur if contributed asset is distributed to any partner (other than contributing partner) within 7 yrs. It also may occur if the contributing partner receives a distribution with a FMV in excess of his adjusted basis in his partnership interest. In this case, the remaining pre-contribution gain on any asset he contributed to the partnership in the preceding 7 years may have to be recognized. (Sec. 704(c))
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8 Nonliquidating Distributions
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C12-Chp-11-1A-Ptshp-Distributions-2012 - Chapter 11A....

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