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Exam 10: Dispositions of Partnership Interests and Partnership Distributions

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Question 1

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Tyson,a one-quarter partner in the TF Partnership,receives a proportionate distribution of $70,000 to liquidate his partnership interest on January 1.Tyson's outside basis is $75,000 including his $10,000 share of TF's liabilities.TF does not hold any hot assets.What is the amount and character of Tyson's recognized gain or loss?

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$5,000 capital gain.
The gain ...

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Question 2

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In the sale of a partnership interest,a selling partner will recognize ordinary income (rather than capital gain)when the partnership assets include cash and land held for 5 years as an investment.

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B) False

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False

Question 3

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The SSC Partnership balance sheet includes the following assets on December 31 of the current year: Which of SSC's assets are considered hot assets under §751(a) ?

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

At the end of last year,Cynthia,a 20% partner in the five-person CYG partnership,has an outside basis of $30,000 including her $15,000 share of CYG debt.On January 1 of the current year,Cynthia sells her partnership interest to Roger for a cash payment of $22,500 and the assumption of her share of CYG's debt.CYG has no hot assets.What is the amount and character of Cynthia's recognized gain or loss on the sale?

Kathy is a 25% 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?

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?

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.The 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.

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

The SSC Partnership balance sheet includes the following assets on December 31 of the current year: Susan,a 1/3 partner,has an adjusted basis of $90,000 for her partnership interest.If Susan sells her entire partnership interest to Emma for $100,000 cash,what is the amount and character of Susan's gain or loss from the sale?

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 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?

Federico is a 30% 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.Federico will recognize ordinary income of $24,000 on the sale of his partnership interest.

Nadine Fimple is a one-third partner in the NWL Partnership with equal inside and outside bases.On January 1,NWL distributes $100,000 to Nadine in complete liquidation of her FPL interest.NWL's balance sheet as of January 1 is as follows: What is the amount and character of Nadine's recognized gain or loss on the distribution?

Hot assets include assets except cash,capital assets and §1231 assets.

Jenny has a $54,000 basis in her 50% partnership interest in the JM Partnership before receiving any distributions.This year JM makes a proportionate current 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?

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?

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

Marcella has a $65,000 basis in her 50% partnership interest in the JM Partnership before receiving any distributions.This year JM makes a proportionate current distribution to Marcella of $10,000 cash and inventory with an $80,000 fair value and a $40,000 basis to JM.What is Marcella's basis in the inventory and her remaining basis in JM after the distribution?

Which of the following assets would not be classified as hot assets?

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