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Partnership Distribution: Liquidating and Non-liquidating

Question 1
1. 1. Delilah receives a proportionate, nonliquidating distribution from the Carbon Partnership. The distribution consists of $50,000 cash and property with an adjusted basis to the partnership of $150,000 and a fair market value of $180,000. Immediately before the distribution, Delilah's adjusted basis for her partnership interest is $170,000. Delilah's basis in the noncash property received is:

$180,000

$150,000

$120,000

$50,000

None of the above.
10 points

Question 2
1. Rosalie is a real estate developer and owns property that is treated as inventory (not a capital asset) in her business. She contributed a parcel of this land (basis $40,000; fair market value $48,000) to a partnership, which will also hold it as inventory. After three years, the partnership sells the land for $60,000. The partnership will recognize a $20,000 capital gain on sale of the property.
True
False
10 points

Question 3
1. 1. Juliet contributed property with a $48,000 basis and fair market value of $100,000 to the JT Partnership in exchange for a 40% interest in partnership capital and profits. During the first year of partnership operations, JT had net taxable income of $40,000 and tax-exempt income of $80,000. The partnership distributed $40,000 cash to Juliet. Her share of partnership recourse liabilities on the last day of the partnership year was $30,000. Juliet's adjusted basis (outside basis) for her partnership interest at year-end is:

$64,000

$126,000

$70,000

$86,000

None of the above
Question 4
1. 1. Micah and Ariana formed an equal partnership on June 1 of the current year. Micah contributed $10,000 cash and land with a basis of $6,000 and a fair market value of $15,000. Ariana contributed equipment with a basis of $30,000 and a value of $25,000. Micah's tax basis in his interest is $16,000; Ariana's tax basis is also $25,000.
True
False

Question 5
1. 1. The Copper Partnership distributed $30,000 cash to Esme in a proportionate, nonliquidating distribution. Esme's basis in her partnership interest was $20,000 immediately before the distribution. As a result of the distribution, Esme's basis is reduced to $0, and she recognizes $10,000 of capital gain.
True
False
10 points
Question 6
1. 1. Izzy's partnership interest basis is $60,000. Izzy receives a proportionate, liquidating distribution from a liquidating partnership of $45,000 cash and inventory having a basis of $20,000 to the partnership and a fair market value of $6,000. Izzy assigns a basis of $6,000 to the inventory and recognizes a $9,000 loss.
True
False

Question 7
1. 1. Piper and Adam formed a partnership. Piper received a 50% interest in partnership capital and profits in exchange for contributing land with a basis of $160,000 and a fair market value of $300,000. Adam received a 50% interest in partnership capital and profits in exchange for contributing $300,000 of cash. Three years after the contribution date, the land contributed by Piper is sold by the partnership to a third party for $360,000. How much taxable gain will Piper recognize from the sale?

$170,000

$140,000

$200,000

$30,000

None of the above

Question 8
1. 1. Molly owns a 30% interest in the capital and profits of the Silver Partnership. Immediately before she receives a proportionate nonliquidating distribution from Silver, the basis of her partnership interest is $60,000. The distribution consists of $20,000 in cash and land with a fair market value of $80,000. Silver's adjusted basis in the land immediately before the distribution is $70,000. As a result of the distribution, Molly recognizes a gain of $30,000 and her basis in the land is $70,000.
True
False

Question 9
1. 1. Sydney is a partner in the Lime Partnership, which is not publicly traded. Her allocable share of Lime's passive ordinary losses from a nonrealty activity for the current year is ($300,000). Sydney has a $125,000 adjusted basis (outside basis) for her interest in Lime (before deduction of any of the passive losses). Her amount "at risk" under §Â 465 is $100,000 (before deduction of any of the passive losses). She also has $60,000 of passive income from other sources. How much of the $300,000 passive loss allocated to her can Sydney deduct on her current year's tax return?

$60,000

$100,000

$300,000

$125,000

None of the above

Question 10
1. 1. Joseph has an outside basis of $80,000 in the Tungsten Partnership as of December 31 of the current year. On that date the partnership liquidates and distributes to Joseph a proportionate distribution of $35,000 cash and inventory with an inside basis to the partnership of $25,000 and a fair market value of $50,000. In addition, Joseph receives a safe which has an inside basis and fair market value of $4,500 and $6,000, respectively. None of the distribution is for partnership goodwill. How much gain or loss will Joseph recognize on the distribution, and what basis will he take in the safe?

$0 loss; $20,000 basis

$14,000 loss; $6,000 basis

$5,000 loss; $-0- basis

$15,500 loss; $4,500 basis

None of the above

Solution Summary

Questions include:
1. computation of basis of noncash property distribution to partners
2. treatment of the gain or loss on the sale of real estate treated as inventory
3. partnership interest with recourse liabilities, tax-exempt income
4. partnership tax basis if equipment contributed has a market value less than tax basis
5. Treatment of cash distribution over and above tax basis
6. Treatment of loss and gain on inventory received during liquidating distribution
7. Section 1231 gain, Taxable gain on land contributed sold by the partnership three years after contribution
8. Gain or loss recognized when cash and land is distributed
9. Allowable passive income and loss
10. Liquidating distribution computation of gain if cash, inventory and other property received

$2.19