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Exam 11: Partnerships: Distributions, transfer of Interests, and Terminations

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Question 51

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The JIH Partnership distributed the following assets to partner James in a proportionate liquidating distribution in which the partnership is liquidated: $25,000 cash,land parcel A (basis of $5,000,fair market value of $30,000),and land parcel B (basis of $5,000,fair market value of $15,000).James's basis in his partnership interest was $85,000 immediately before the distribution.

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Question 52

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Partner Jordan received a distribution of $80,000 cash from the JKL Partnership in complete liquidation of his partnership interest.If Jordan's outside basis immediately before the distribution was $90,000,and if the partnership has made (and not revoked) a § 754 election in a prior year,which of the following statements is true? (Assume the partnership owns no "hot assets.")

A) The partnership will step-down the basis of its assets by $10,000.
B) The partnership will step-up the basis of its assets by $10,000.
C) Jordan will recognize $10,000 of ordinary loss on the distribution.
D) Jordan will recognize a $10,000 capital loss on the distribution.
E) Both a.and d.are true.

F) B) and E)
G) B) and D)

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Question 53

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Last year,Darby contributed land (basis of $60,000 and fair market value of $80,000) to the Seagull LLC in exchange for a 25% interest in the LLC.In the current year,the LLC distributes the land (now worth $82,000) to Shelby,who is also a 25% owner.Immediately prior to the distribution,Darby's basis in the LLC was $70,000,while Shelby's basis in the LLC was $110,000.How much gain or loss must be recognized and by whom? What is Shelby's basis in the property she receives and Darby's basis in her partnership interest following the distribution?

Carla,Marla,and Yancy are equal partners in the CMY Partnership.The partnership balance sheet reads as follows on December 31 of the current year. Partner Yancy has an adjusted basis of $35,000 for his partnership interest.If Yancy sells his entire partnership interest to new partner Paula for $60,000 cash,how much can the partnership step-up the basis of Paula's share of partnership assets under §§ 754 and 743(b) ?

Jason sold his 40% interest in the HIJ Partnership to Kim for $280,000.The inside basis of all partnership assets was $600,000 at the time of the sale.If the partnership makes a § 754 election,it will record a $40,000 step-up in the basis of the partnership assets,and the step-up will be attributed solely to Kim.

In a proportionate liquidating distribution,Scott receives a distribution of $20,000 cash,accounts receivable (basis of $0 and fair market value of $40,000) ,and land (basis of $30,000 and fair market value of $60,000) .In addition,the partnership repays all liabilities,of which Scott's share was $20,000.Scott's basis in the entity immediately before the distribution was $100,000.As a result of the distribution,what is Scott's basis in the accounts receivable and land,and how much gain or loss does he recognize?

The Crimson Partnership is a service provider.Its assets consist of unrealized receivables (basis $0,value $200,000),cash of $200,000,and land (basis of $280,000,value of $400,000).Assume 25% general partner Jill has a basis in her partnership interest of $130,000.If the ongoing partnership distributes the $200,000 cash to Jill in liquidation of her interest in the partnership,she will recognize ordinary income of $50,000 and a capital gain of $20,000.

Generally,gain is recognized on a proportionate current or liquidating distribution only if the cash distributed exceeds the partner's basis in the partnership interest.

For income tax purposes,proportionate and disproportionate distributions from a partnership are treated similarly.

Francine receives a proportionate liquidating distribution when the basis of her partnership interest is $20,000.The distribution consists of $25,000 cash and noninventory property (adjusted basis to the partnership of $10,000 and fair market value of $12,000) .The partnership has no hot assets.How much gain or loss does Francine recognize,and what is her basis in the distributed property?

In a proportionate liquidating distribution,RST Partnership distributes to partner Rita cash of $10,000,accounts receivable (basis of $0 and fair market value of $20,000),and land (basis of $25,000 and fair market value of $20,000).Rita's basis was $40,000 before the distribution.On the liquidation,Rita recognizes a gain of $10,000,and her basis is $20,000 in each the land and accounts receivable.

In a proportionate nonliquidating distribution,cash is deemed to be distributed first,followed by capital assets and,last,unrealized receivables and inventory.

Joe has a 25% capital and profits interest in the calendar-year GDJ Partnership.His adjusted basis for his partnership interest on October 15 of the current year is $200,000.On that date,the partnership liquidates and makes a proportionate distribution of the following assets to Joe.

Milton contributed property to the MDB Partnership in 2007.At the time of the contribution,the basis in the property was $10,000 and its value was $15,000.In 2010,MDB distributed that property to partner Dana.Milton may be required to recognize gain on the distribution to Dana.

Landon received $30,000 cash and a capital asset (basis of $60,000 and fair market value of $80,000) in a proportionate liquidating distribution.His basis in his partnership interest was $100,000 prior to the distribution.How much gain or loss does Landon recognize and what is his basis in the asset received?

A partnership continues in existence unless one of the following happens: 1)all assets are distributed to the partners in liquidation of the partnership,or 2)one partner buys the interest of the second partner in a two partner partnership (resulting in a single owner of the entity).

William's basis in the WAM Partnership interest was $100,000 just before he received a proportionate liquidating distribution consisting of investment land (basis of $30,000,fair market value $40,000) ,and inventory (basis of $30,000,fair market value $70,000) .After the distribution,William's recognized gain or loss and his basis in the land and inventory are: