Can you help me with this assignment?
1 Greg's outside basis in his interest in the GO Partnership is $360,000. In a proportionate non-liquidating distribution, the partnership distributes to him cash of $60,000, inventory (fair market value of $200,000, basis to the partnership of $160,000), and land (fair market value of $50,000, basis to the partnership of $80,000). The partnership continues in existence. a. Does the partnership recognize any gain or loss as a result of this distribution? b. Does Greg recognize any gain or loss as a result of this distribution? c. Calculate Greg's basis in the land, in the inventory, and in his partnership interest immediately following the distribution.
2 At the beginning of the tax year, Monica's basis in the MIP LLC was $100,000, including Monica's $50,000 share of the LLC's liabilities. At the end of the year, MIP distributed to Monica cash of $20,000 and inventory (basis of $10,000, fair market value of $16,000). In addition, MIP repaid all of its liabilities by the end of the year. a. If this is a proportionate non-liquidating distribution, what is the tax effect of the distribution to Monica and MIP? After the distribution, what is Monica's basis in the inventory and in her MIP interest? b. Would your answers to (a) change if this had been a proportionate liquidating distribution?
3 The basis of Jesse's partnership interest is $90,000. Jesse receives a pro rata liquidating distribution consisting of $30,000 cash, land with a basis of $50,000 and a fair market value of $60,000, and his proportionate share of inventory with a basis of $20,000 to the partnership and a fair market value of $22,000. Assume the partnership also liquidates.
a. How much gain or loss, if any, must Jesse recognize as a result of the distribution?
b. What basis will Jesse take in the inventory and land?
c. If the land is sold two years later for $60,000, what are the tax consequences to Jesse?
d. What are the tax consequences to the partnership as a result of the liquidating distribution?
e. Is any planning technique available to the partnership to avoid any "lost basis" results?
f. Would your answer to (b) change if this had been a non-liquidating distribution?
Please see below for the complete solution...
Question 1 a.
The general rule of Section 731 is that no gain or loss is recognized by the partner or the partnership in a distribution of cash or property. Since Greg's partnership basis is higher than the partnership's basis on the properties other than cash distributed no gain or loss is recognized by the partnership.
Question 1 b.
A partner's basis in property received from a partnership is the same as the basis the partnership had in the property. However, if the partner's basis in the partnership interest is less than the partnership's basis in the asset, the lower basis-in-interest is assigned to the property. Also, in a liquidating distribution, any distributed property other than cash, unrealized receivables, or inventory will be assigned the partner's remaining basis in the partnership interest.
Hence, Greg doesn't recognize any gain or loss as a result of the distribution
Question 1 c.
Greg's partnership interest = 360,000 - 60,000 - 160,000 - 80,000 = ...
The expert determines whether a partnership recognize gain or loss as a result of the distributions are examined.