[Capital Assets]. So the definition is now going to includeboth inv. and 1231.d. How would answer to A change if A were a dealer in real estate?§751(d) Inventory items.--For purposes of this subchapter, the term “inventory items” means-- (1) property of the partnership of the kind described in section 1221(a)(1), Normal Inventory (2) any other property of the partnership which, on sale or exchange by the partnership, would be considered property other than a capital asset and other than property described in section 1231, and Any other property that would produce ordinary income (3) any other property held by the partnership which, if held by the selling or distributee partner, would be considered property of the type described in paragraph (1) or (2). Anything that would create ordinary income for the PARTNER Trying to prevent partners who would have ordinary income from contributing property to the partnership and then converting that to capital income on sale of partnership interest Entire $20 Gain on sale would be ordinary because of the share Problem 2: Identifying Hot Assets §§751(c) and (d) Receivable from the sale of skis – receivable with an amount not previously included in income for goods delivered – hot asses §751(c)(1) Ski lessons §751(c)(2) Contracts for lessons to be given (no basis) o Distinction between terminable and non-terminable – look at definition of Unrealized Receivables discusses “rights to payment” so if the lessons are terminable at the option of the skier will probably not be an AR Receivable from the sale of capital asset (common stock) is not unrealized receivable Inventory – its all inventory regardless of whether appreciated/deprecaited Rental equipment § 1231 property, depreciable subject to § 1245 recapture, picked up in §751(c) Recapture – treated as an unrealized receivable under language added to §751(c) Land – investment lots but tells us in the facts that A the selling partner is a dealer in real estate so similar to 1.d. above the lots would be §751(d)(3) inventory o Lots where shop is located – probably not inventory Shop Itself - (building) was depreciated – this would not be recaptured under §1250 because land was depreciated on straight line basis o Nothing in §751 cross-references §1(h)6, unrecaptured 1250 gain stands alone – “luke warm” asset o Subject to parallel counterpart – §1h6 replicates §751(a) at 25% rate o Substantiality and recapture – there are no rules for unrecaptured §1250 requirement IX. A DJUSTMENTS TO B ASIS S ALE OF P
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