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Exam 15: Dispositions of Partnership Interests and Partnership Distributions

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Question 1

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Doris owns a 1/3 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 $20,000.On that date,she receives an operating distribution of her share of partnership assets shown below: $\begin{array}{rrr}&\text { Partnership's }&\text { Asset's Fair }\\&\text { Basis in Asset}&\text { Market Value }\\\text {Cash}&81,000& \$ 81,000 \\\text {Inventory}&36,000& 24,000 \\\text {Land}&120,000& 135,000\end{array}$ What is the amount and character of Doris' gain or loss on the distribution? What is her basis in the distributed assets?

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$7,000 capital gain.Her basis in the cas...

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Question 2

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Randolph is a 30% 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) A) and C)

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B

Question 3

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Riley is a 50% 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?

Lola is a 35% partner in the LW Partnership.On January 1,LW distributes $39,000 cash to Lola in complete liquidation of her partnership interest.LW has only capital assets and no liabilities at the date of the distribution.Lola's basis in LW is $50,000.What is the amount and character of Lola's gain or loss?

Unrealized receivables include accounts receivable for which of the following partnerships?

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 $40,000 basis in their partnership interests including their share of partnership liabilities.On December 31,EE partnership repays $50,000 of debt.What is the amount and character of Esther's recognized gain or loss? What is Esther's remaining basis in EE?

Which of the following statements regarding a partner's basis of inventory received in a liquidating distribution is true?

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

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

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?

Shauna is a 50% partner in the SH Partnership.Shauna sells one-half of her interest to Kara for $60,000 cash.Just before the sale,Shauna's basis in her entire partnership interest is $150,000 including her $60,000 share of the partnership liabilities.SH's assets on the sale date are as follows:   $\begin{array} { l r r r } & \text { Basis } & \text { FMV } \\\text { Cash } & \$ 80,000 & \$ 80,000 \\ \text { Irventory } & 60,000 & 180,000 \\ \text { Lard held For irvestrnent }& \underline {160,000 }& \underline {100,000} \\\text { Total } & \underline {\$ 300,000} & \underline {\$ 300,000}\end{array}$ What is the amount and character of Shauna's gain or loss on the sale?

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?

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 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.

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 pro-rata operating distribution to Heidi of $60,000 cash.What is the amount and character of Heidi's recognized gain or loss? What is Heidi's remaining basis in HT?

Marty is a 40% owner of MB Partnership.Marty has decided to sell his interest in the business to Emilio for $100,000 cash plus the assumption of his share of MB's liabilities.Assume Marty's inside and outside basis in MB are equal.MB shows the following balance sheet as of the sale date: $\begin{array}{l}\begin{array}{lll}\text {Assets:} \\\text {Cash} \\\text {Receivables} \\\text {Inventory} \\\text {Land held for investment} \\\text {Totals} \\\end{array}\begin{array}{lll}\text { Basis } & \text { FMV } \\\$ 160,000 & \$ 160,000 \\50,000 & 50,000 \\80,000& 170,000 \\\underline {60,000} & \underline {40,000 }\\\underline { \$ 350,000}& \underline {\$ 420,000}\end{array}\end{array}$ $\begin{array}{l}\text { Liabilities ard capital: }\\\begin{array} { l l r } \text { Liabilities } & & \$ 120,000 \\\text { Capital } & - \text { Marty } & 92,000 \\& - \text { Barly } & \underline { 138,000 }\\\text { Totals } & & \underline { \$ 350,000}\end{array}\end{array}$ What is the amount and character of Marty's recognized gain or loss?

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: $\begin{array}{l}\begin{array}{lll}\\\text { Cash } \\\text { Accounts receivable } \\\text { Stock investment } \\\text { Land } \\\text { Totals } \\\end{array}\begin{array}{lll}\text { Basis } & \text { FMV } \\\$ 180,000 & \$ 180,000 \\-0- & 240,000 \\75,000 & 120,000 \\\underline {300,000} & \underline {360,000} \\\underline { \$ 55,000 }& \underline {\$ 900,000} \\\end{array}\end{array}$ 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?

Daniela is a 25% partner in the JRD Partnership.On January 1,JRD makes a proportionate,liquidating 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 her JRD partnership interest is $20,000.What is the amount and character of Daniela's gain or loss from the distribution?

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: $\begin{array}{l}\begin{array}{lll}\\\text { Cash } \\\text { Accounts receivable } \\\text { Stock investment } \\\text { Land } \\\text { Totals } \\\end{array}\begin{array}{lll}\text { Basis } & \text { FMV } \\\$ 180,000 & \$ 180,000 \\-0- & 240,000 \\75,000 & 120,000 \\\underline {300,000} & \underline {360,000} \\\underline { \$ 55,000 }& \underline {\$ 900,000} \\\end{array}\end{array}$ Katrina receives one-third of each of the partnership assets.She has a basis in her partnership interest of $250,000.What is the amount and character of any recognized gain or loss to Katrina? What is Katrina's basis in the distributed assets?

Under which of the following circumstances will a partner recognize a loss from an operating distribution?