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Exam 10: Dispositions of Partnership Interests and Partnership Distributions

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Question 51

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Which of the following is false concerning special basis adjustments under Section 754?

A) Special basis adjustments are intended to eliminate discrepancies between inside and outside bases.
B) Special basis adjustment is an annual election made by the partnership.
C) Special basis adjustments can occur when a new investor purchases a partnership interest.
D) Special basis adjustments can occur when a partner recognizes a gain or loss from a distribution.

E) All of the above
F) A) and B)

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Question 52

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Daniel's basis in the DAT Partnership is $135,000.DAT distributes its land to Daniel in complete liquidation of his partnership interest.DAT reports the following balance sheet just before the distribution: If DAT has a §754 election in place,what is the amount of the special basis adjustment resulting from the distribution to Daniel? What is DAT's basis in its remaining assets?

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The partnership has a $80,000 negative s...

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Question 53

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Jackson is a 30% partner in the JJM Partnership when he sells his entire interest to Rhonda for $112,000 cash.At the time of the sale,Jackson's basis in JJM is $64,000.JJM does not have any debt or hot assets.What is Jackson's gain or loss on the sale of his interest?

In which type of distribution may a partner recognize a loss on the distribution?

Tyson,a one-quarter partner in the TF Partnership,receives a proportionate distribution to liquidate his partnership interest on January 1.The distribution consists of $70,000 cash and inventory with a fair value of $40,000 (inside basis is $22,000).Tyson's outside basis is $90,000 including his $10,000 share of TF's liabilities.What is the amount and character of Tyson's recognized gain or loss? What is Tyson's basis in the distributed inventory?

Katrina is a one-third partner in the KYR partnership (calendar year-end).Katrina decides she wants to exit the partnership and receives a proportionate distribution to liquidate her partnership interest on January 1.The partnership has no liabilities and holds the following assets as of January 1: Katrina receives one-third of each of the partnership assets.She has a basis in her partnership interest of $110,000.What is the amount and character of any recognized gain or loss to Katrina? What is Katrina's basis in the distributed assets?

Tyson,a one-quarter partner in the TF Partnership,receives a proportionate distribution to liquidate his partnership interest on January 1.The distribution consists of $70,000 cash and inventory with a fair value of $40,000 (inside basis is $22,000).Tyson's outside basis is $105,000 including his $10,000 share of TF's liabilities.What is the amount and character of Tyson's recognized gain or loss? What is Tyson's basis in the distributed inventory?

A partner that receives cash in an operating distribution recognizes loss if the cash distributed is less than the partner's outside basis in the partnership immediately before the distribution.

Under what conditions will a partner recognize a gain in a liquidating distribution?

Daniel acquires a 30% interest in the PPZ Partnership from Paolo,an existing partner for $39,000 of cash.The PPZ Partnership has borrowed $10,000 of recourse liabilities as of the date Daniel bought the interest.What is Daniel's basis in his partnership interest?

The PW partnership's balance sheet includes the following assets immediately before it liquidates: In complete liquidation PW distributes the cash to Pamela and the unrealized receivables to Wade (equal partners) .Pamela and Wade each have an outside basis in PW equal to $5,000.PW has no liabilities at the time of the liquidation.What is the amount and character of Wade's recognized gain or loss?

Cash distributions include decreases in a partner's share of partnership liabilities.

Randolph is a 30% partner in the RD Partnership.On January 1,RD distributes $15,000 cash and inventory with a fair value of $20,000 (inside basis of $10,000) to Randolph in complete liquidation of his interest.RD has no liabilities at the date of the distribution.Randolph's basis in RD is $27,000.What is the amount and character of Randolph's gain or loss on the distribution?

The SSC Partnership balance sheet includes the following assets on December 31 of the current year: Susan,a 1/3 partner,has an adjusted basis of $90,000 for her partnership interest.If Susan sells her entire partnership interest to Emma for $120,000 cash,how much capital gain and ordinary income must Susan recognize from the sale?

Brian is a 25% partner in the BC Partnership.On January 1,BC distributes $20,000 cash and land with a $16,000 fair value (inside basis $8,000) to Brian.BC has no liabilities at the date of the distribution.Brian's basis in BC is $16,000.What is the amount and character of Brian's gain or loss on the distribution?

Daniela is a 25% partner in the JRD Partnership.On January 1,JRD makes a proportionate distribution of $16,000 cash,inventory with a $16,000 fair value (inside basis $8,000) ,and accounts receivable with a fair value of $8,000 (inside basis of $0) to Daniela.JRD has no liabilities at the date of the distribution.Daniela's basis in JRD is $21,000.What is Daniela's basis in the distributed inventory and accounts receivable?

Kristen and Harrison are equal partners in the KH Partnership.The partners formed the partnership 5 years ago by contributing cash.Prior to any distributions Harrison has a basis in his partnership interest of $44,000.On December 31,KH makes a proportionate operating distribution of $50,000 cash to Harrison.What is the amount and character of Harrison's recognized gain or loss and what is his remaining basis in KH?

Tyson is a 25% partner in the KT Partnership.On January 1,KT makes a proportionate distribution of $16,000 cash,inventory with a $10,000 fair value (inside basis $4,000) ,land A with a fair value of $8,000 (inside basis of $12,000) and land B with a fair value of $6,000 (inside basis of $4,000) to Tyson.KT has no liabilities at the date of the distribution.Tyson's basis in KT is $23,000.What is Tyson's basis in the distributed inventory,land A and land B?

Daniela is a 25% partner in the JRD Partnership.On January 1,JRD makes a proportionate distribution of $16,000 cash,inventory with a $16,000 fair value (inside basis $8,000) ,and accounts receivable with a fair value of $8,000 (inside basis of $12,000) to Daniela.JRD has no liabilities at the date of the distribution.Daniela's basis in JRD is $20,000.What is Daniela's basis in the distributed inventory and accounts receivable?

When determining a partner's gain on sale of his partnership interest,the selling partner must include her share of partnership debt in the amount realized.