How much gain will the partnership recognize on the sale

Reference no: EM132219689

Questions -

Q1. Stacy is a one-third partner in Tyknot Partners. Her basis in her partnership interest is $85,000, consisting of her $25,000 contribution to capital and her $60,000 share of the partnership's $180,000 outstanding liabilities. She receives a non-liquidating distribution consisting of property valued at $125,000 (tax basis $40,000). The distribution reduces her interest in the partnership from one-third to one-fifth. It is not a disproportionate distribution.

1) Will Stacy recognize any gain or loss on receipt of the distribution?

2) What basis will Stacy take in the property received from the partnership?

3) What will be Stacy's remaining basis in her partnership interest?

4) Assume the property received by Stacy was encumbered by a mortgage of $50,000, which Stacy assumed in connection with the distribution. Assume the distribution still reduces Stacy's interest in the partnership from one-third to one-fifth. How would your answers change?

Q2. Bust-out Partner had the following balance sheets at year-end

	Basis	FMV
Cash	30,000	30,000
Property 1	33,000	51,000
Property 2	42,000	60,000
Property 3	27,000	45,000
TATAL ASSETS	132,000	186,000
Capital, Sam	33,000	46,500
Capital, Maggie	33,000	46,500
Capital, Jack	66,000	93,000
TOTAL LIABILITIES & CAPITAL	132,000	186,000

On December 31, Jack sold his fifty percent interest in the partnership to an unrelated buyer for $93,000. None of the partnership's properties constitute inventory unrealized receivables. Assume the partnership does not have a Section 754 election in effect, and decides not to make one. Shortly after new buyer's acquisition of Jack's interest in the partnership, the partnership sells property 1 for its $51,000 fair market value.

a) How much gain will the partnership recognize on the sale, and how much of this gain will be allocated to the new partner for tax purposes?

b) If the partnership did have a Section 754 election in effect, how much gain would be allocated to the new partner in connection with the partnership's sale of property 1?

c) Assume the partnership had a Section 754 election in effect when the new partner acquired Jack's fifty percent partnership interest. Assume that the partnership later sold property 1 for $69,000(it appreciated in value after the new partner's entry). How much gain would the partnership recognize for tax purposes, and how much of this gain would be allocated to the new partner?

Reference no: EM132219689

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