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2 for purposes of computing depreciation special

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(2) For purposes of computing depreciation, special allocation rules must be used for contributedproperty where the FMV differs from basis.(3) Ifaccounts receivableare contributed and are later disposed of by the partnership, anygainwould be ordinary.(4) Ifinventoryis contributed and is later disposed of by the partnershipwithin 5 years, anygainwould be ordinary.(5) Ifcapital loss propertyis contributed and is later disposed of by the partnership, anylosswould be a capital lossto the extent of the precontribution loss.Example:George transfers land (FMV $200,000) to a partnership for a 50% capital and profit interest. George’sbasis in the land was $50,000.If the partnership sells the land in year 2 for $225,000, how much of thegain should George report?
following would be subject to separate reporting:Capital gains and losses§1231 gains and lossesCharitable contributions§179 expensingAMT adjustments and preferences**Theseseparately stated itemsdo not enter into the computation of net profit or lossas shown on page 1 of the partnership income tax return. Instead, they arereported separatelyon the Form K-1.***Losses:(1) Losses aredeductible by the partner only to the extent the partner has basis in the partnership.(2) Also, thepartner must be “at riskin order to deduct a partnership loss.(a)General partners are at riskonly as torecourse debt.(b)Limited partners are not at riskas to any partnership debt.(c) While apartner’s basis may be affected by partnership debt,losses are deductible only ifthe partner is at risk. Any losses that are not deductible because of these at risk rules aresuspended and are deductible when the partner becomes at riskExampleF is a partner in the calendar year DEFG partnership. F’soutside basis was $14,500. $3,000 cashdistributionfrom DEFG.Operating loss was $20,000, while her shares of current-yeardividends andlong-term capital gains were $3,400 and $1,300respectively.F’s January 1 outside basis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,500Plus: Allocated share of income (Dividend + LTCG). . . . . . . . . . . . . . . . . 4,700Less: Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(3,000)Deductible share of allocated loss . . . . . . . . . . . . . . . . . . . . . . . . . .(16,200)F’s December 31 outside basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-0-F’s loss carryforward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 3,800If a partner is allocated a distributive share ofmore than one type of lossand thepartner’soutside basis is insufficientto absorb the aggregate amount of losses, the § 704(d)limitation is applied proportionately to each type of lossExampleRefer to the facts in Example 23, but assume that F is allocated a $6,000 § 1231 loss inaddition to the $20,000 operating loss. F’s currently deductible amounts of each type ofloss are computed as follows:Operating loss:($20,000 ÷ $26,000) x $16,200 = $12,462§ 1231 loss:($6,000 ÷ $26,000) x $16,200 = $3,738Thenondeductible $7,538 operating loss and $2,262 § l231 loss are carried forwardinto

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Term
Spring
Professor
N/A
Tags
Options, basis, Taxation in the United States, partner

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