c. What will be Carla’s basis in her partnership interest?
55. Sowder Partners has the following balance sheets: Basis FMV Cash 12,000 12,000 Accounts Receivable 0 70,000 Inventory 84,000 120,000 Sec. 1231 Property 24,000 38,000 TOTAL ASSETS 120,000 240,000 Capital, Teri 60,000 80,000 Capital, Brandi 30,000 40,000 Capital, Chris 90,000 120,000 TOTAL CAPITAL 120,000 240,000 Chris has been approached by an unrelated third party with an offer to purchase his interest in the partnership. a. What is the appropriate selling price for Chris’s interest? b. Assume he agrees to sell his interest for $120,000 cash. How much gain will he recognize on the sale, and what will be its character? 56. Consider the facts in problem 55 above. Assume that rather than selling his partnership interest to an outsider, Chris receives a $120,000 cash distribution from the partnership in complete liquidation of his interest therein. How will the consequences differ from those associated with the sale? 57. Bust-out Partners had the following balance sheets at year-end: Basis FMV Cash 30,000 30,000 Property 1 33,000 51,000 Property 2 42,000 60,000 Property 3 27,000 45,000 TOTAL ASSETS 132,000 186,000 Capital, Sam 33,000 46,500 Capital, Maggie 33,000 46,500 Capital, Jack 66,000 93,000 TOTAL LIABILITIES & CAPITAL 132,000 186,000 On December 31, Jack sold his fifty percent interest in the partnership to an unrelated buyer for $93,000. None of the partnership’s properties constitute inventory or unrealized receivables. a. How much gain must Jack recognize on the sale? b. What will be the buyer’s tax basis in the newly acquired partnership interest? c. Assume the partnership has a Section 754 election in effect. Determine the amount of the partnership’s basis adjustment under Section 743(b), and allocate the adjustment among the partnership’s assets.
58. Consider the facts in problem 57 above. Assume the partnership does not have a Section 754 election in effect, and decides not to make one. Shortly after the new buyer’s acquisition of Jack’s interest in the partnership, the partnership sells property 1 for its $51,000 fair market value. a. How much gain will the partnership recognize on the sale, and how much of this gain will be allocated to the new partner for tax purposes? b. If the partnership did have a Section 754 election in effect, how much gain would be allocated to the new partner in connection with the partnership’s sale of property 1? c. Assume the partnership had a Section 754 election in effect when the new partner acquired Jack’s fifty percent partnership interest. Assume that the partnership later sold property 1 for $69,000 (it appreciated in value after the new partner’s entry). How much gain would the partnership recognize for tax purposes, and how much of this gain would be allocated to the new partner? 59. Elbegone Partnership had the following assets when one of its partners sold her interest in the partnership: Basis FMV Asset 1 26,000 50,000 Asset 2 45,000 31,000 Asset 3 36,000 48,000 As a result of the sale of one of the partnership interests, Elbegone is required to make a $21,000 adjustment to the basis of its assets under Section 743(b).
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