Normally a distribution of property from a partnership does not result in gain

Normally a distribution of property from a

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25. Normally a distribution of property from a partnership does not result in gain recognition. However, a distribution of marketable securities may be treated, in part, as a distribution of cash that could result in gain recognition.
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26. Mark contributed property to the MDB Partnership in 2009. At the time of the contribution, the basis in the property was $40,000 and its value was $50,000. In 2013, MDB distributed that property to partner Dara. Because this is a distribution of precontribution gain property, MBD (the partnership) may be required to recognize a gain that is allocated to all of the partners. 27. Generally, a distribution of property does not result in gain to a partner on either a current or liquidating distribution. A situation where a gain may arise, however, is when a partner contributed appreciated property to the partnership and that property is distributed back to the contributing partner within seven years of the contribution. 28. A disproportionate distribution arises when the partnership distributes a share of partnership hot assets to one or more partners that is not the same as the partner’s ownership interest in the partnership. 29. A payment to a retiring general partner for his or her share of goodwill of a partnership in which capital is not a material income-producing factor is classified as a § 736(a) income payment and results in ordinary income to the retiring partner and a current deduction to the partnership, as long as the goodwill payment is provided for in the partnership agreement. 30. 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. 31. 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.
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32. Beth sells her 25% partnership interest to Katie for $50,000 cash on July 1 of the current tax year. Katie alsoassumed Beth’s share of the partnership’s liabilities. Beth’s basis in her partnership interest at the beginning of the year was $40,000, including a $15,000 share of partnership liabilities. The partnership’s income for the entire year was $100,000, and Beth’s share of partnership debt was $10,000 as of the date she sold the partnership interest. Assume the partnership has no hot assets and that its income is earned evenly throughout the year. Beth recognizes a gain of $12,500 on the sale.
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