C12-Chp-11-1B-Ptshp-Sec-751-etc-2012

C12-Chp-11-1B-Ptshp-Sec-751-etc-2012 - Chapter 11B...

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Chapter 11B. Partnerships. Sec. 751 etc. C11-Chp-11-1B-Ptshp-Sec 751-etc-2011 Edited 2011-0104 Howard Godfrey, Ph.D., CPA Professor of Accounting Copyright 2011
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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. If you are not careful, this chapter becomes 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 nonliquidatin g 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 is 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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4 Terminating Interest in a Partnership. Liquidating Distributions. Effects of Sec. 751. Sec. 751 has the same impact for both liquidating and nonliquidating distributions. A step-by-step analysis of Sec. 751 on liquidating distributions is needed.
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5 Terminating Interest In a Partnership. Liquidating Distributions. Effects of Distribution on the Partnership. A partnership recognizes no gain or loss on a liquidating distribution. If a Sec. 751 deemed sale occurs, a partner and the partnership may be required to recognize gain or loss on assets deemed sold to other partners. The partnership may be subject to optional or mandatory basis adjustments .
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6 Cash Basis Consulting Firm (Ptshp) [$000's] Basis FMV Cash $100 Acct. Receivable 0 200 Total Assets $300 A, Capital $50 $150 B, Capital Total Capital A's Choices 1. Sell partnership interest for $150,000. 2. Partnership collects Acct. Receivable. Take a $150,000 Liquidating Distribution.
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7 Basic Example, Slide 1. Lets take a look at a basic balance sheet and consider the tax impact on a partner who sells his or her partnership interest for cash. The gain will first appear to be a capital gain, with no ordinary income. If the partner retires by withdrawing money from the partnership, again it appears at first that the withdrawing partner has capital gain, with no ordinary income. [Partnership uses cash basis.] Outside basis is equal to inside basis.
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8 Basic Example - Slide 2 Cash Basis Basis FMV Apprec. Cash $72,000 Acct. Rec. 0
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This note was uploaded on 03/09/2012 for the course ACCT 6120 taught by Professor Godfrey,h during the Spring '08 term at UNC Charlotte.

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C12-Chp-11-1B-Ptshp-Sec-751-etc-2012 - Chapter 11B...

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