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Exam 10: Dispositions of Partnership Interests and Partnership Distributions

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Question 41

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Jenny has a $54,000 basis in her 50percent partnership interest in the JM Partnership before receiving any distributions. This year JM makes a proportionate operating distribution to Jenny of a parcel of land with an $80,000 fair value and a $64,000 basis to JM. The land is encumbered with a $30,000 mortgage (JM's only liability) . What is Jenny's basis in the land and her remaining basis in JM after the distribution?

A) $80,000 land basis, $0 JM basis.
B) $64,000 land basis, $0 JM basis.
C) $64,000 land basis, $5,000 JM basis.
D) $80,000 land basis, $5,000 JM basis.

E) A) and D)
F) B) and D)

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Question 42

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Randolph is a 30percent partner in the RD Partnership. On January 1, RD distributes $15,000 cash, an investment with a fair value of $20,000 (inside basis of $10,000) , and a parcel of land with a fair value of $10,000 (inside basis of $5,000) to Randolph in complete liquidation of his interest. RD has no liabilities at the date of the distribution. Randolph's basis in his RD Partnership interest is $48,000. What is Randolph's basis in the distributed investment and land?

A) $10,000 investment, $5,000 land.
B) $22,000 investment, $11,000 land.
C) $20,000 investment, $10,000 land.
D) $20,000 investment, $13,000 land.

E) A) and B)
F) B) and D)

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Question 43

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Riley is a 50percent partner in the RF Partnership and has an outside basis of $56,000 at the end of the year prior to any distributions. On December 31, Riley receives a proportionate operating distribution of $6,000 cash and a parcel of land with a $14,000 fair value and an $8,000 basis to RF. What is the amount and character of Riley's recognized gain or loss and what is his basis in his partnership interest?

Kathy is a 25percent partner in the KDP Partnership and receives a parcel of land with a fair value of $150,000 (inside basis of $100,000) in complete liquidation of her partnership interest. Kathy's outside basis immediately before the distribution is $200,000. KDP currently has a §754 election in effect and has no hot assets or liabilities. What is KDP's special basis adjustment from the distribution?

Tyson is a 25percent partner in the KT Partnership. On January 1, KT makes a proportionate distribution of $16,000 cash, inventory with a $16,000 fair value (inside basis $8,000) , and land with a fair value of $8,000 (inside basis of $12,000) to Tyson. KT has no liabilities at the date of the distribution. Tyson's basis in his KT Partnership interest is $24,000. What is Tyson's basis in the distributed inventory and land?

Heidi and Teresa are equal partners in the HT Partnership. The partners formed the partnership seven years ago by contributing cash. Prior to any distributions, the partners each have a $50,000 basis in their partnership interests. On December 31, the partnership makes a proportionate operating distribution to Teresa of $36,750 cash and stock with a fair value of $24,000 (inside basis of $8,600). What is the amount and character of Teresa's recognized gain or loss? What is Teresa's remaining basis in HT?

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

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?

A partner's debt relief from the sale of a partnership interest will decrease his outside basis.

A partner recognizes a loss when she receives cash and other property with inside bases greater than her outside basis in a liquidating distribution.

Doris owns a one-third capital and profits interest in the calendar-year DB Partnership. Her adjusted basis for her partnership interest on July 1 of the current year is $20,100. On that date, she receives an operating distribution of her share of partnership assets shown below: What is the amount and character of Doris's gain or loss on the distribution? What is her basis in the distributed assets?

Jaime has a basis in her partnership interest of $50,000 when the partnership distributes (in an operating distribution) two parcels of land to Jaime, each valued at $30,000. Prior to the distribution, the partnership's basis in parcel A is $40,000 and the basis in parcel B is $20,000. Jaime allocates $20,000 of basis to parcel A and $30,000 of basis to parcel B.

Jackson is a 30percent 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?

Tyson is a 25percent partner in the KT Partnership. On January 1, KT makes a proportionate distribution of $16,000 cash and land with a $16,000 fair value (inside basis $8,000) to Tyson. KT has no liabilities at the date of the distribution. Tyson's basis in his KT Partnership interest is $20,000. What is Tyson's basis in the distributed land?

Esther and Elizabeth are equal partners in the EE Partnership. The partners formed the partnership seven years ago by contributing cash. Prior to any distributions, the partners each have a $52,200 basis in their partnership interests, including their share of partnership liabilities. On December 31, EE Partnership repays $61,400 of debt. What is the amount and character of Esther's recognized gain or loss? What is Esther's remaining basis in EE?

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

A partner will recognize a loss from a liquidating distribution when the distribution includes only cash, unrealized receivables, and inventory and the partner's outside basis is less than the sum of the bases of the distributed assets.

Carmello is a one-third partner in the CDW Partnership with equal inside and outside bases. On December 31, Carmello sells his interest to Conrad for $100,000 cash. CDW makes a §754 election and its balance sheet as of December 31 is as follows: What is the amount and sign (positive or negative) of Conrad's special basis adjustment? If CDW sells the capital asset next year for $300,000, what is the amount of gain Conrad will recognize because of the sale?

The SSC, a cash-method partnership, has a balance sheetthat includes the following assets on December 31 of the current year: Susan, a one-third 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?

Locke is a 50percent partner in the LS Partnership. Locke has a basis in his partnership interest of $84,000 at the end of the current year, prior to any distribution. On December 31, Locke receives an operating distribution of $30,000 cash. LS has no debt or hot assets. What is the amount and character of Locke's recognized gain or loss? What is Locke's ending basis in his partnership interest?