Basis FMV Gain Accounts receivable 0 20000 20000 Inventory 5000 16667 11667

Basis fmv gain accounts receivable 0 20000 20000

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Basis FMV GainAccounts receivable $ 0 $20,000 $20,000Inventory 5,000 16,667 11,667Ordinary income $31,667Basis for Barbara's partnership interest $71,667Less: Basis of inventory deemed distributed 5,000Remaining basis after Sec. 751 distribution $66,667Cash received as a distribution: Total $95,000
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35 Testbank © 2017 CCH Incorporated and its affiliates. All rights reserved. Chapter 20 Liability relief $21,667 Total $116,667 Payment for inventory $16,667 Acct. Rec. 20,000 36,667 80,000Capital gain $13,33371. Barney has a $10,000 capital gain. The basis of the partnership interest as well as the sales price for the interest must include Barney's share of the partnership liabilities. Thus, Barney's sales price was $45,000, and his basis $35,000, resulting in a gain of $10,000. As there were no Section 751 assets, the gain is capital gain. 72. Harvey has a $11,000 capital gain. Harvey's basis for gain or loss will include his share of liabilities whether recourse or nonrecourse. Thus, his basis was $12,000 + $10,000 - $15,000 + $12,000, or $19,000. The sales price was $30,000 ($20,000 + $10,000 liabilities). There were no Section 751 assets, so the entire gain of $11,000 is capital gain. 73. The sales price of the interest was $30,000, Chris's basis was $15,000. Of the $15,000 recognized gain, $8,000 is ordinary income because of the payment for the unrealized receivables and the remaining $7,000 is capital gain. 74. (a.) Edgar will have $15,000 in taxable income from the sale of the two items. Of the $50,000 gain recognized, 30 percent is attributed to Edgar. (b.) Edgar will have no taxable income from the two items. Edgar would have a special adjustment to reflect the appreciation of the 30 percent interest in the accounts receivable and inventory he purchased. Their sale and collection were for him a return of his basis. (c.) James will have $35,000 in taxable income. The special adjustment attributed to Edgar's purchase has no effect upon the reporting of James's income. 75. Jody's basis in the partnership interest is reduced by the $60,000 cash to $20,000. Land #1, which has a $30,000 basis to the partnership, is allocated the remaining $20,000 of Jody's basis for the partnership interest. The $10,000 "lost basis" for Land #1 results in an increase to similar partnership property, in this case Section 1231 and capital assets. So, it potentially is allocated to the equipment, building, and Land #2. The adjustment must be allocated in a manner which reduces the difference between the basis and fair market value of the property. With respect to the equipment, building, and Land #2, the only appreciated property to which the adjustment could be allocated is the building. If any of the adjustment were allocated to the equipment and Land #2, it would increase the difference between the basis and fair market value of the properties. Therefore, the $10,000 increase is allocated solely to the building.
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36 CCH Federal TaxationComprehensive Topics © 2017 CCH Incorporated and its affiliates. All rights reserved. Chapter 20 DIFFICULTY LEVEL RATINGSCHAPTER 20The following table denotes the relative difficulty level of each question. Teachers may wish to organize test questions based on the difficulty level of the particular class.
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  • Spring '14
  • JamesJ.Jurinski
  • Business, Balance Sheet, Sales, Generally Accepted Accounting Principles, partner, CCH Incorporated, CCHTestBank

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