Questions -
Q1. Franco owns a 60% interest in the Dulera LLC. On December 31 of the current tax year, his basis in the LLC interest is $128,000. The fair market value of the interest is $140,000. In a proportionate non-liquidating distribution, the LLC distributes $30,000 cash and equipment with an adjusted basis of $5,000 and a fair market value of $8,000 to him on that date.
How much is Franco's adjusted basis in the LLC interest after the distribution and what is the amount of his basis in the equipment received?
Q2. Lola owns a one-half interest in the Lenax LLC. Her basis in this ownership interest is $22,000 on December 31, 2016, after accounting for the calendar year LLC's 2016 operations. On that date, the LLC distributes $25,000 cash to Lola in a proportionate non-liquidating distribution.
What is the amount of any gain or loss Lola recognizes as a result of the distribution?
Q3. Pablo has a $63,000 basis in his partnership interest. On May 9 of the current tax year, the partnership distributes to him, in a proportionate non-liquidating distribution, cash of $25,000, cash basis receivables with an inside basis of $0 and a fair market value of $16,000, and land with a basis and fair market value to the partnership of $80,000.
a) How much is Pablo's realized and recognized gain on the distribution?
b) What is Pablo's basis in the receivables, land and partnership interest following the distribution?
Q4. When Bruno's basis in his LLC interest is $150,000, he receives cash of $55,000, a proportionate share of inventory, and land in a distribution that liquidates both the LLC and his entire LLC interest. The inventory has a basis to the LLC of $45,000 and a fair market value of $48,000. The land's basis is $70,000 and the fair market value is $60,000.
How much gain or loss does Bruno recognize and what is his basis in the inventory and land received in the distribution?
Q5. When Magdalena's outside basis is $58,000, she receives a liquidating distribution of $15,000 cash and a proportionate share of inventory having a partnership basis of $20,000 and a fair market value of $24,000. The distribution results in a liquidation of both the partnership and her interest.
a) How much is Magdalena's basis in the inventory received?
b) What is the amount of any gain or loss recognized on the liquidation?
Q6. In 2016, Ryce contributes non-depreciable property with an adjusted basis of $60,000 and a fair market value of $95,000 to the Montgomery Partnership in exchange for one-half interest in profits and capital. In 2017, when the properties fair market value is $100,000, the partnership distributes the property to Jarvis, the other one-half partner.
Which partner must recognize a gain and what is the amount recognized? What is the effect on the partner's basis in the partnership interest?
Q7. In 2015, Dudley contributed land to the Prosperity LLC. His basis in the land was $100,000. The fair market value at the contribution date was $115,000. In 2016, the LLC distributes other property with an adjusted basis of $60,000 and fair market value of $90,000 to Dudley. Dudley's basis in his LLC interest was $50,000 immediately after the distribution.
As a result of the distribution in 2016, how much gain does Dudley recognize, how much is his basis in his LLC interest after the distribution, and how much is the LLC's basis in the land Dudley originally contributed?
Q8. Wylie receives cash of $145,000 in liquidation of his partnership interest, in which he has a basis of $110,000. The partnership owns no hot assets. After following all of the classification requirements of 736, $100,000 of his amount is classified as property payment and $45,000 is classified as a guaranteed payment.
As a result of the liquidation proceeds, how much will Wylie recognize as a capital gain or loss and how much will be ordinary income?
Q9. The Whitewater LLP is equally owned by three partners and has the following balance sheet at the end of the current tax year:
|
Basis
|
FMV
|
|
Cash
|
$60,000
|
$60,000
|
|
Unrealized receivables
|
-0-
|
15,000
|
|
Land
|
$15,000
|
$45,000
|
|
$75,000
|
$120,000
|
|
Petula, capital
|
$25,000
|
$40,000
|
|
Prudence, capital
|
$25,000
|
$40,000
|
|
Primrose, capital
|
$25,000
|
$40,000
|
|
$75,000
|
$120,000
|
Partner Petula is an active (i.e., "general) partner retiring from the service-oriented partnership. She receives $60,000 cash, none of which is stated to be for goodwill.
a) How much of the payment is for "unstated goodwill"?
b) How is the $60,000 allocated between a 736(a) income payment and a 736(b) property payment?
Q10. At the beginning of the tax year, Melodie's basis in the MIP LLC was $60,000, including her $40,000 share of the LLC's liabilities. At the end of the year, MIP distributed to Melodie cash of $10,000 and inventory (basis of $6,000, fair market value of $10,000). 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 Melodie and MIP? After the distribution, what is Melodie's basis in the inventory and in her MIP interest?
b) Would your answers to part (a) change if this had been a proportionate liquidating distribution? Explain.
Q11. Vincent is a 50% partner in the TAV Partnership. Hebecame a partner three years ago when he contributed land with a value of $60,000 and abasis of $30,000 (current value is $100,000). Tyler and Anita each contributed $30,000cash for a 25% interest. Vincent's basis in his partnership interest is currently $150,000; the other partners' bases are each $75,000. The partnership has the following assets:
|
|
Basis
|
FMV
|
|
Cash
|
$200,000
|
$200,000
|
|
Accounts receivable
|
-0-
|
200,000
|
|
Marketable securities
|
70,000
|
100,000
|
|
Land
|
30,000
|
100,000
|
|
Total
|
$300,000
|
$600,000
|
In general terms, describe the tax result if TAV distributes a $50,000 interest in the landeach to Tyler and Anita and $100,000 of accounts receivable to Vincent at the end of thecurrent year. Calculations are not required.
Q12. Assume the same facts as in Problem 31, except that TAV distributes $100,000of cash to Vincent, $50,000 of marketable securities to Tyler, and $50,000 of accountsreceivable to Anita. In general terms, describe the tax result of the distribution.
Q13. Assume the same facts as Problem 31, except that TAV distributes a $50,000interest in the land and $50,000 of accounts receivable to Vincent, and $25,000 of cashand $25,000 of accounts receivable each to Anita and Tyler. In general terms, describethe tax result of the distribution.
Q14. Use the assets and partners' bases from Problem 31. Assume the partnership distributes all its assets in a liquidating distribution. In deciding the allocation of assets,what issues should the partnership consider to minimize each partner's taxable gains?
Q15. In each of the following independent liquidating distributions in which the partnership also liquidates, determine the amount and character of any gain or loss to be recognized by each partner and the basis of each asset (other than cash) received. In each case, assume distributions of hot assets are proportionate to the partners.
a) Brandon has a partnership basis of $60,000 and receives a distribution of $75,000 in cash.
b) Barry has a partnership basis of $80,000 and receives $30,000 cash and a capital asset with a basis to the partnership of $40,000 and a fair market value of $50,000.
c) Bryan has a partnership basis of $100,000 and receives $30,000 cash, inventory with abasis to the partnership of $20,000, and a capital asset with a partnership basis of$30,000. The inventory and capital asset have fair market values of $25,000 and$40,000, respectively.
d) Blake has a partnership basis of $60,000 and receives a distribution of $20,000cash and an account receivable with a basis of $0 to the partnership (value is$30,000).