2/ The BAM Partnership distributed the following assets to partner Barbie in a proportionate nonliquidating distribution: $10,000 cash basis 30k , land parcel A (basis of $5,000, fair market value of $30,000) basis 5k and land parcel B (basis of $25,000, fair market value of $30,000). Barbie’s basis in her partnership interest was $40,000 immediately before the distribution. Barbie will allocate a basis of $15,000 each to the two land parcels , and her basis in her partnership interest will be reduced to $0. FALSE Barbie takes a total substituted basis in the land parcels of $30,000 (basis in interest of $40,000 less $10,000 cash distribution). That basis must be allocated between the two properties. First, the properties take a carryover basis of $5,000 for parcel A and $25,000 for parcel B, regardless of their fair market values. As there is no remaining basis to allocate, these amounts become Barbie’s bases in the two properties. 3/ Zach’s partnership interest basis is $100,000. Zach receives a proportionate, liquidating distribution from a liquidating partnership of $50,000 cash and inventory (loss can be reg.) having a basis of $20,000 to the partnership and a fair market value of $30,000. Zach assigns a basis of $20,000 to the inventory and recognizes a $30,000 loss because no property was distributed 4/ Cynthia’s basis in her LLC interest was $60,000, including her $40,000 share of the LLC’s debt. In a proportionate liquidating distribution in which the LLC also liquidates, Cynthia receives cash of $50,000, and inventory with a basis of $3,000 and a fair market value of $5,000. Cynthia recognizes a gain of $30,000 on the distribution and takes a basis of $0 in the inventory. 5/ Two years ago, Marcus contributed land with a basis of $6,000 and a fair market value of $20,000 in exchange for a 30% interest in the MNO LLC. This year, when the value was $25,000 , that property was distributed to Jamal, whose basis in the LLC interest was $50,000 before the distribution. Marcus will recognize a gain of $14,000 and increase his basis in his LLC interest by that same amount; Jamal will take a $20,000 basis in the distributed property. 6/ The Crimson Partnership is a service provider. Its assets consist of unrealized receivables (basis of $0, fair market value of $400,000), cash of $300,000, and land (basis of $200,000, fair market value of $300,000). Assume 20% general partner Jana has a basis in her partnership interest of $100,000. If the ongoing partnership distributes $200,000 of cash to Jana in liquidation of her interest in the partnership, she will recognize ordinary income of $80,000 and a capital gain of $20,000. 7/ Taylor’s basis in his partnership interest is $140,000, including his $60,000 share of partnership debt. Sandy buys Taylor’s partnership interest for $100,000 cash and she assumes Taylor’s $60,000 share of the partnership’s debt. If the partnership owns no hot assets, Taylor will recognize a capital loss of $40,000 capital gain 20k .
8/ A partnership has accounts receivable with a basis of $0 and a fair market value of $30,000 and depreciation recapture potential of $20,000. All other assets of the partnership are either cash, capital assets, or § 1231 assets. If a purchaser acquires a 40% interest in the partnership from another partner, the selling partner will be required to recognize ordinary income of $12,000.
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- Spring '19
- Business, The Land