profits, capital, and losses, and is an active ("material") participant in the partnership, how muchof her share of the operating loss can Patricia deduct? What Code provisions could cause a suspension of the loss? Page 6of 9
14. Karli owns a 25% capital and profits interest in the calendar-year KJDV Partnership. Her adjusted basis for her partnership interest on July 1 of the current year is $200,000. On that date,she receives a proportionate current (nonliquidating) distribution of the following assets.Partnership’s Basis inAssetAsset’s Fair MarketValueCash$120,000$120,000Inventory50,00060,000Land (held for investment)70,000100,000a.Calculate Karli’s recognized gain or loss on the distribution, if any.b.Calculate Karli’s basis in the inventory received.c.Calculate Karli’s basis in land received. The land is a capital asset.d.Calculate Karli’s basis for her partnership interest after the distribution.Page 7of 9
15. The December 31, balance sheet of DBW, LLP, a service-providing partnership is as follows.Adjusted BasisFMVCashReceivablesCapital assetsTotalDana, capitalBrooke, capitalWhitney, capitalTotal$180,000–0–90,000$270,000$ 90,00090,00090,000$270,000$180,00060,000120,000$360,000$120,000120,000120,000$360,000The partners share equally in partnership capital, income, gain, loss, deduction, and credit. Capital is not a material income-producing factor to the partnership. On December 31, partner Dana (who is an active managing partner in the partnership) receives a distribution of $120,000 cash in liquidation of her partnership interest under § 736. Dana’s outside basis for the partnership interest immediately before the distribution is $90,000. How much is Dana’s gain or loss on the distribution and what is its character?Page 8of 9
16. Bryan has $150,000 basis in his partnership interest. The partnership distributes to him cash basis of $35,000, cash basis receivables with a basis of $0 and a FMV of $30,000 and threeparcels of land: (Parcel 1 Basis $95,000 – FMV $60,000) - (Parcel 2 Basis $60,000----FMV $45,000) - (Parcel 3 Basis $40,000----FMV 35,000).a. What is Bryan’s realized gain and how much is recognized? b. What is the land’s substituted basis?c. What is Bryan adjusted basis for each parcel of Land?Page
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