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Exam 21: Dispositions of Partnership Interests and Partnership Distributions

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Question 21

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Federico is a 30 percent partner in the FRM Partnership when he sells his entire interest to Maria for $98,000.At the time of the sale,Federico's basis in FRM is $74,000.FRM does not have any debt.In addition,FRM's assets include accounts receivable with zero tax basis and $21,000 fair market value at the date of the sale.The remaining assets of the partnership are capital and §1231 assets.Federico will recognize ordinary income of $24,000 on the sale of his partnership interest.

A) True
B) False

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Question 22

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Kristen and Harrison are equal partners in the KH Partnership.The partners formed the partnership five 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?

A) $0 gain,$0 basis.
B) $6,000 capital gain,$0 basis.
C) $6,000 capital loss,$0 basis.
D) $6,000 capital gain,$44,000 basis.

E) A) and C)
F) B) and C)

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Question 23

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Daniela is a 25 percent 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?

Catherine is a 30 percent partner in the ACW Partnership,with an outside basis of $20,000.ACW distributes land with a basis of $12,000 and fair value of $18,000 to Catherine in complete liquidation of her interest.Catherine recognizes a capital loss of $2,000 on the distribution.

Jenny has a $54,000 basis in her 50 percent 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?

Brian is a 25 percent 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 his BC Partnership interest is $16,000.What is the amount and character of Brian's gain or loss on the distribution?

The VRX Partnership (a calendar year-end entity)has the following assets and no liabilities: The equipment was purchased for $360,000 and VRX has taken $90,000 of depreciation.The stock was purchased seven years ago.What are VRX's hot assets for purposes of a sale of partnership interest?

Inventory is substantially appreciated if the fair market value of all inventory items exceeds 100 percent of their basis to the partnership.

Which of the following statements is true regarding partnership operating distributions?

Which of the following statements regarding the sale of a partnership interest is false?

Martha is a 40 percent partner in the MMM Partnership,with an outside basis of $50,000.MMM distributes $40,000 cash and accrual-basis accounts receivable with a basis and fair market value of $20,000.Martha does not recognize gain or loss on the distribution and takes a basis in the cash of $40,000 and a basis in the receivables of $10,000.

Operating distributions completely terminate a partner's interest in the partnership.

Which of the following is true concerning a partner's basis in assets (other than money) distributed in an operating distribution?

Randolph is a 30 percent partner in the RD Partnership.On January 1,RD distributes $15,000 cash,inventory 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 $37,000.What is Randolph's basis in the distributed inventory and land?

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

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

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?

A partnership making an operating distribution will recognize gain or loss only when the partner that receives the distribution recognizes gain or loss.

Locke is a 50 percent 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?

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 $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?