What are the tax results of the distribution

Reference no: EM132756228

Question: The JKLM Partnership owns the following assets on October 1 of the current year:Assets Partnership's Basis FMV

Cash $12,000 $12,000

Receivables 3,000 3,000

Inventory 5,250 6,000

Machinery* 47,500 60,000

Land 9,125 19,000

Total $76,875 $100,000

Sale of machinery for its FMV would result in $12,500 of §1245 depreciation recapture. Thus, the machinery's FMV and original cost are the same numerical value. Which partnership items are unrealized receivables?

a. Is the partnership's inventory substantially appreciated?

b. Assume the JKLM Partnership has no liabilities and Jack's basis in his partnership interest is $ 76,875. On October 1 of the current year, Jack receives a $ 6,250 current distribution in cash, which reduces his partnership interest from one- fourth to onefifth. What are the tax results of the distribution (i. e., the amount and character of any gain, loss, or income recognized and Jack's basis in his partnership interest)?

Reference no: EM132756228

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