Reference no: EM133067451
Question - Lonnie Davis has been a general partner in the Highland Partnership for many years and is also a sole proprietor in a separate business. To spend more time focusing on his sole proprietorship, he plans to leave Highland and will receive a liquidating distribution of $50,000 in cash and land with a fair market value of $100,000 (tax basis of $120,000). Immediately before the distribution, Lonnie's basis in his partnership interest is $350,000, which includes his $50,000 share of partnership debt. The Highland Partnership does not hold any hot assets.
-What are the amount and character of any gain or loss to Lonnie?
-What is Lonnie's basis in the land?
-What are the amount and character of Lonnie's gain or loss if he holds the land for 13 months as investment property and then sells it for $100,000?
-What are the amount and character of Lonnie's gain or loss if he places the land into service in his sole proprietorship and then sells it 13 months later for $100,000?
-Do your answers to parts (c) and (d) above suggest a course of action that would help Lonnie to achieve a more favorable tax outcome?
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