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Exam 21: Dispositions of Partnership Interests and Partnership Distributions

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Question 31

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

A) Inventory.
B) Depreciation recapture.
C) Cash.
D) Accounts receivable for a cash-method taxpayer.

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

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Question 32

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Scott is a 50 percent partner in the LS Partnership.Scott has a basis in his partnership interest of $84,000 at the end of the current year,prior to any distribution.On December 31,Scott receives an operating distribution of $9,000 cash and a parcel of land with a $21,000 fair market value and a $12,000 basis to the partnership.LS has no debt or hot assets.What is the amount and character of Scott's recognized gain or loss? What is Scott's basis in the distributed property? What is Scott's ending basis in his partnership interest?

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Scott recognizes no gain or loss.He take...

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Question 33

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Ted is a 30 percent partner in the TDW Partnership,with an outside basis of $20,000.TDW distributes $15,000 of cash in complete liquidation of Ted's interest.Ted recognizes a capital loss of $5,000 on the distribution.

Lola is a 35 percent partner in the LW Partnership.On January 1,LW distributes $39,000 cash to Lola in complete liquidation of her partnership interest.LW has only capital assets and no liabilities at the date of the distribution.Lola's basis in LW is $50,000.What is the amount and character of Lola's gain or loss?

In an operating distribution,when a partnership distributes property other than money with a basis that exceeds the partner's outside basis,the partner assigns a carryover basis to the distributed asset and recognizes a gain.

Tyson is a 25 percent partner in the KT Partnership.On January 1,KT makes a proportionate,liquidating distribution of $16,000 cash and land with a $16,000 fair value (inside basis $8,000) to Tyson.KT has no liabilities at the date of the distribution.Tyson's basis in his KT Partnership interest is $20,000.What is the amount and character of Tyson's gain or loss from the distribution?

Randolph is a 30 percent partner in the RD Partnership.On January 1,RD distributes $15,000 cash and inventory with a fair value of $20,000 (inside basis of $10,000) 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 $27,000.What is the amount and character of Randolph's gain or loss on the distribution?

Which of the following statements regarding hot assets for purposes of disproportionate distributions is false?

The purpose of hot asset rules is to ensure that selling partners recognize all gain or loss on the sale of their partnership interests as capital.

At the end of last year,Cynthia,a 20 percent 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?

Under what conditions will a partner recognize a gain in a liquidating distribution?

Joan is a 30 percent partner in the OJT Partnership when she sells her entire interest to Crissy for $100,000 cash.At the time of the sale,Joan's basis in OJT is $63,000 (which includes her $10,000 share of OJT liabilities).OJT does not have any hot assets.What is the amount and character of Joan's gain or loss on the sale?

Daniela is a 25 percent partner in the JRD Partnership.On January 1,JRD makes a proportionate 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 Daniela's basis in the distributed inventory and accounts receivable?

Daniela is a 25 percent partner in the JRD Partnership.On January 1,JRD makes a proportionate 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 $0) to Daniela.JRD has no liabilities at the date of the distribution.Daniela's basis in her JRD Partnership interest is $21,000.What is Daniela's basis in the distributed inventory and accounts receivable?

Sarah is a 50 percent partner in the SF Partnership and has an outside basis of $56,000 at the end of the year prior to any distributions.On December 31,Sarah receives a proportionate operating distribution of $20,000 cash.What is the amount and character of Sarah's recognized gain or loss and what is her basis in her partnership interest?

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?

Marty is a 40 percent owner of MB Partnership.Marty has decided to sell his interest in the business to Emilio for $100,000 cash plus the assumption of his share of MB's liabilities.Assume Marty's inside and outside basis in MB are equal.MB shows the following balance sheet as of the sale date: What is the amount and character of Marty's recognized gain or loss?

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

Lola is a 35 percent partner in the LW Partnership.On January 1,LW distributes $39,000 cash to Lola in complete liquidation of her partnership interest.LW has only capital assets and no liabilities at the date of the distribution.Lola's basis in LW is $30,000.What is the amount and character of Lola's gain or loss?

Doris owns a one-third capital and profits interest in the calendar-year DB Partnership.Her adjusted basis for her partnership interest on July 1 of the current year is $20,000.On that date,she receives an operating distribution of her share of partnership assets shown below: What is the amount and character of Doris's gain or loss on the distribution? What is her basis in the distributed assets?