Three exceptions to non recognition Gain is recognized in either event below 1

Three exceptions to non recognition gain is

This preview shows page 9 - 14 out of 34 pages.

Three exceptions to non-recognition. Gain is recognized in either event below:2.Disguised sale. A partner’s contribution of property to a P/S followed by a Formation of Partnerships—Overview of Code Section 721 Chapter 16, Exhibit 8c
IRC 721 — Example 1 $0 $35,000 Services $10,000 $50,000 Land Basis FMV Asset FACTS “A” transfers the following items to XYZ Partnership in exchange for partnership interest: QUESTION: How much income does A recognize on the transfer? Chapter 16, Exhibit 10
Inside and Outside Basis Inside Basis : This is the partnership’s basis in the partnership’s assets. Each partner will have a share of the inside basis equal to his/her ownership interest. The inside basis is important to determine gain/loss upon the disposition of partnership’s assets. Outside Basis : This is the partner’s basis in the partnership interest. The outside basis is important to determine gain/loss upon the disposition of a partner’s interest in a partnership. Chapter 16, Exhibit 17
Inside Basis Computations How is a partnership’s inside basis in property contributed by partners determined? Chapter 16, Exhibit 17
Outside Basis Computations Gain recognized by partner on services contributed + Share of “separately stated items” +/– Share of P/S’s taxable income or loss under Code Sec. 702(a)(8) (i.e., earned income/loss, both active and Passive) +/– Basis in contributed property + How is the partner’s outside basis in the partnership (P/S) determined? Code Sec. 722 and related regulations provide the following formula:

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture