Investment Partnerships Problem Nonrecognition allows diversification without

Investment partnerships problem nonrecognition allows

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Investment Partnerships Problem Nonrecognition allows diversification without sale Gain recognized on contributions to a pshp if it is an investment company Investment company > 80% of value of assets including cash is held for investment and consists of stocks, securities, etc. 101
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Disguised Sale Issue Partner contributes property to pshp and receives an interest in the pshp and cash Compare with boot in corporate formation In pshp, generally nontaxable distribution but much like a sale Otey transaction: Transfer followed by cash distribution was treated as nontaxable transfer & nontaxable return of basis Example 102
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Disguised Sale Example C is a 1/3 partner in a pshp. Her basis in her interest is $25,000. She owns a machine which the pshp would like to use (value $15,000, basis $10,000). C would like to be paid for it yet she does not want to recognize gain. C contributes the machine and at the same time the pshp distributes $15,000 cash (the FMV) to her. Since C has a basis for her interest of $25,000 is the cash a nontaxable distribution to her? §707(a)(2)(B): if a partner transfers property to a pshp and there is a "related" transfer of money (or other property) to the partner by partnership and such transfers when viewed together are properly characterized as a sale, then treated as such 103
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Chapter 9 End of slides Part 1 of 2 2019 Edition 104
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