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

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Question 21

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Dan receives a proportionate nonliquidating distribution when the basis of his partnership interest is $30,000.The distribution consists of $10,000 in cash and property with an adjusted basis to the partnership of $24,000 and a fair market value of $26,500.Dan's basis in the noncash property is:

A) $26,500.
B) $24,000.
C) $20,000.
D) $10,000.
E) None of the above.

F) B) and D)
G) All of the above

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Question 22

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At the beginning of the year,Elsie's basis in the E&G Partnership interest is $90,000.She receives a proportionate nonliquidating distribution from the partnership consisting of $10,000 of cash,unrealized accounts receivable (basis of $0,fair market value $40,000) ,and land (basis of $30,000,fair market value of $50,000) .After the distribution,Elsie's bases in the accounts receivable,land,and partnership interest are:

A) $0;$30,000;and $50,000.
B) $0;$50,000;and $30,000.
C) $40,000;$30,000;and $10,000.
D) $40,000;$40,000;and $0.
E) None of the above.

F) C) and D)
G) A) and E)

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Question 23

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In a proportionate liquidating distribution in which the partnership is also liquidated,Ralph received cash of $30,000,accounts receivable (basis of $0,fair market value of $20,000),and equipment (basis of $0,fair market value of $10,000).Immediately before the distribution,Ralph's basis in the partnership interest was $40,000.Ralph realizes and recognizes a loss of $10,000,and his basis is $0 in both the accounts receivable and the equipment.

Partner Jordan received a distribution of $90,000 cash from the JKL Partnership in complete liquidation of his partnership interest.If Jordan's outside basis immediately before the distribution was $80,000,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.")

In a liquidating distribution,a partnership must distribute all of its property to all of its partners.

In a proportionate liquidating distribution,Scott receives a distribution of $20,000 cash,accounts receivable (basis of $0,fair market value of $40,000) ,and land (basis of $30,000,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?

On December 31 of last year,Rachel gave her daughter,Courtney,a gift of a 25% interest in a partnership in which capital is a material income-producing factor.For the current calendar year,the partnership's ordinary income was $200,000.Rachel and Courtney were the only partners,and there were no guaranteed payments.Rachel's services performed for the partnership were worth $40,000,and Courtney has never performed any services.What is Courtney's distributive share of partnership income for the current year?

Carlos receives a proportionate liquidating distribution consisting of $8,000 cash and inventory with a basis to the partnership of $5,000 and a fair market value of $6,000.His basis in his partnership interest was $15,000 immediately before the distribution.Carlos assigns a basis of $5,000 to the inventory,and recognizes a $2,000 capital loss.

Tyler's basis in his partnership interest is $110,000,including his share of partnership debt.Sarah buys Tyler's partnership interest for $60,000 cash and she assumes Tyler's $90,000 share of the partnership's debt.If the partnership owns no hot assets,Tyler will recognize a capital loss of $50,000.

Catherine's basis was $50,000 in the CAR Partnership just before she received a proportionate nonliquidating distribution consisting of land held for investment with a basis to CAR of $40,000 (value of $60,000) ,and inventory with a basis of $40,000 (value of $40,000) .After the distribution,Catherine's bases in the land and inventory are:

Nicole's basis in her partnership interest was $160,000,including her $50,000 share of partnership liabilities.The partnership decides to liquidate,and after repaying all liabilities,distributes all remaining assets proportionately to the partners.Nicole receives $30,000 cash and accounts receivable with a $50,000 basis and a $52,000 fair market value to the partnership.What gain or loss does Nicole recognize,and what is her basis in the accounts receivable?

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

In a proportionate liquidating distribution,Alexandria receives a distribution of $70,000 cash,accounts receivable (basis of $0,fair market value of $20,000) ,and land (basis of $30,000,fair market value of $60,000) .In addition,the partnership repays all liabilities,of which Alexandria's share was $40,000.Alexandria's basis in the entity immediately before the distribution was $90,000.As a result of the distribution,what is Alexandria's basis in the accounts receivable and land,and how much gain or loss does she recognize?

Which of the following transactions will not result in termination of a partnership for Federal tax purposes?

Mike contributed property to the MDB Partnership in 2009.At the time of the contribution,the basis in the property was $30,000 and its value was $55,000.In 2012,MDB distributed that property to partner Dana.Because distributions from a partnership to a partner are generally nontaxable,neither Mike nor Dana should recognize any gain on the distribution.

In a proportionate liquidating distribution in which the partnership is liquidated,Bill received cash of $120,000,inventory (basis of $6,000,fair market value of $8,000),and a capital asset (basis and fair market value of $16,000).Immediately before the distribution,Bill's basis in the partnership interest was $90,000.

Martha receives a proportionate nonliquidating distribution when the basis of her partnership interest is $50,000.The distribution consists of $60,000 cash and noninventory property (adjusted basis to the partnership of $20,000,fair market value of $23,000) .How much gain or loss does Martha recognize,and what is her basis in the distributed property and in her partnership interest following the distribution?

Mack has a basis in a partnership interest of $200,000,including his share of partnership debt.At the end of the current year,the partnership distributed to Mack,in a proportionate nonliquidating distribution,cash of $20,000,inventory (basis to the partnership of $30,000 and fair market value of $40,000) ,and land (basis to the partnership of $40,000 and fair market value of $42,000) .In addition,Mack's share of partnership debt decreased by $12,000 during the year.What basis does Mack take in the inventory and land and in the partnership interest (including debt share) following the distribution?

The LMO Partnership distributed $30,000 cash to Emma in a proportionate,nonliquidating distribution.Emma's basis in her partnership interest was $25,000 immediately before the distribution.As a result of the distribution,Emma's basis is reduced to $0 and she recognizes a $5,000 gain.

Tom and Terry are equal owners in the Tatum LLC,a cash basis service entity.Tatum has unrealized receivables of $400,000 (basis of $0) ,and no other hot assets.Goodwill is provided for in the LLC's operating agreement.If Tatum distributes cash of $500,000 to Tom in liquidation of his LLC interest,which of the following statements is incorrect?