Practical guide to partnerships and llcsinstructors

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Practical Guide to Partnerships and LLCs—Instructor’s Guide Solutions 7 It would then be allocated to the Properties as follows: Built-in Additional Adjuste d Basis FMV Gn/Los s W's share Adjustmen t Basis Property A $39,00 0 $54,00 0 $15,000 $5,000 -$1,125 $42,875 Property B $60,00 0 $42,00 0 - $18, 000 -$6,000 -$875 $53,125 $99,00 0 $96,00 0 -$3,000 -$1,000 -$2,000 $96,000 The additional adjustment required of the capital gain properties is the additional negative adjustment required of -$2,000 ($4,000 total adjustment minus $7,000 net positive adjustment to ordinary income property minus $1,000 net negative adjustment to capital gain properties based on a hypothetical sale) times $54,000/$96,000 (= -$1,125) for Property A and times $42,000/$96,000 (= -$875) for Property B. If Property B is sold for $45,000, the total loss will be $45,000 - $53,125 = -$8,125. However, W’s share of the basis in Property B equals 1/3($60,000) - $6,000 – $875 = $13,125. W’s share of the gain (loss) is therefore 1/3($45,000 sales price) - $13,125 = $1,875 gain. The other partners’ shares of the loss are 1/3($45,000 sales price) – 1/3($60,000 common basis) = -$5,000. The total loss will be $1,875 - $5,000 - $5,000 = -$8,125. The basis adjustment only has an effect on the gain or loss the transferee partner must recognize. 11. When will the sale of a partnership interest cause a termination of the partnership for tax purposes?
12. The ABCDE partnership had the following occur: 11/30/2014 – A died and left her 20% interest to G. 1/1/2015 – B gave his interest to H. The partnership does not have any debt. 3/1/2015 – C contributed her 20% interest to the C corporation in a tax-free exchange. 6/1/2015 – D sold his 20% interest to E. 12/31/2015 – A new partner, F, was allowed into the partnership with a 1/6 interest in capital and profits. ©2015 CCH Incorporated. All Rights Reserved.
Practical Guide to Partnerships and LLCs—Instructor’s Guide Solutions 8 Which of these constitutes a sale or exchange of a partnership interest under Code Section 708, and is there an actual termination of the partnership for tax purposes?

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