Partners w x y and z form the ace partnership

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Chapter 3 / Exercise 2
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11. Partners W, X, Y, and Z form the Ace partnership, contributing the following: Interest Basis FMV Liability W 40% Prop. 1 $40,000 $200,000 $160,000 X 40% Prop. 2 $120,000 $60,000 $20,000 Y 10% Prop. 3 $10,000 $70,000 $60,000 Z 10% Prop. 4 $30,000 $20,000 $10,000 How much is each partner’s basis in their partnership interest? How much is each partner’s capital account? What is each property’s basis to the partnership, assuming that a Code Sec. 754 election is not in effect? 12. On April 6, Cathy contributes the following to the ABC Partnership: Inventory (FMV = $10,000, basis = $7,000) purchased on December 10 of last year. Land (FMV = $160,000, basis = $250,000) purchased on January 15 of last year. Cash = $30,000. What will Cathy’s holding period for her partnership interest be on April 6?
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Chapter 3 / Exercise 2
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Chapter 3 – Receipt of a Partnership Interest for Services Reading: Paragraphs 301-304. 1. If a capital interest in a partnership is received for services, what are the tax effects to the service partner, the continuing partners, and the partnership? 2. If the capital interest is not vested, when will the service partner recognize the income from the receipt of the partnership interest? 3. What are the tax effects if a §83(b) election is made by a service partner if they get a partnership capital interest that is not vested? 4. What are the two benefits of making a §83(b) election in the case of a nonvested capital interest exchanged for services? 5. By when does the §83(b) election have to be made?
6. The XYZ partnership has the following balance sheet: Assets Tax Basis FMV Real estate $120,000 $180,000 Liabilities $0 $0 Capital X $40,000 $60,000 Y $40,000 $60,000 Z $40,000 $60,000 $120,000 $180,000 If Q provides $45,000 of services in exchange for a $25% interest in the partnership, what is the tax effect to Q, X, Y, Z, and XYZ? Assume all of the partners are individuals. How much income does Q recognize? How much gain do X, Y, and Z recognize? How much of a deduction do they get? What basis will XYZ have in the Real estate? What is the balance sheet afterward? If the property is later sold for $180,000, how much gain will each partner recognize? What if it is later sold for $200,000? What would your answer to the above questions be under the Proposed Regulations?
7. The XYZ partnership has the following balance sheet: Assets Tax Basis FMV Real estate $300,000 $210,000 Liabilities $0 $0 Capital X $100,000 $70,000 Y $100,000 $70,000 Z $100,000 $70,000 $300,000 $210,000 If Q provides $52,500 of services in exchange for a $25% interest in the partnership, what is the tax effect to Q, X, Y, Z, and XYZ? Assume all of the partners are individuals. How much income does Q recognize? How much gain do X, Y, and Z recognize? How much of a deduction do they get? What basis will XYZ have in the Real estate? What is the balance sheet afterward? If the property is later sold for $210,000, how much gain will each partner recognize? What if it is sold for $180,000?
Chapter 4 – Calculation of Partnership Taxable Income Reading: Paragraphs 401-404.02.

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