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Question;1223S,88 Match the following independent;descriptions as ?hot? (i.e., ordinary income) or nonhot assets with the;statements below.Inventory with a basis of $10,000 and a fair market value;of $15,000.Marketable securities (not held as inventory).Cash basis accounts;receivable.Installment receivables for sale of a capital asset.Land held by the;partnership for the purpose of subdividing and selling lots.Inventory with a;basis of $10,000 and a fair market value of $10,500.Hot assets for purposes of;distributions, liquidation of a partnership interest under ? 736, and sale of a;partnership interest. Not a hot asset. Hot assets for purposes of;distributions, liquidation of a partnership interest under ? 736, and sale of a;partnership interest. Not a hot asset. May be a hot asset for some but not all;the purposes stated in (a). May be a hot asset for some but not all the;purposes stated in (a).;[a] 1. Inventory with a basis of;$10,000 and a fair market value of $15,000.;[b] 2. Marketable securities;(not held as inventory).;[c] 3. Cash basis accounts;receivable.;[d] 4. Installment receivables;for sale of a capital asset.;[e] 5. Land held by the;partnership for the purpose of subdividing and selling lots.;[f] 6. Inventory with a basis;of $10,000 and a fair market value of $10,500.;a. Hot assets for purposes of;distributions, liquidation of a partnership interest under ? 736, and sale of a;partnership interest.;b. Not a hot asset.;c. Hot assets for purposes of;distributions, liquidation of a partnership interest under ? 736, and sale of a;partnership interest.;d. Not a hot asset.;e. May be a hot asset for some;but not all the purposes stated in (a).;f. May be a hot asset for some;but not all the purposes stated in (a).;1224S,89;Chelsea owns a 25% capital and profits interest in the calendar-year CJDV;Partnership. Her adjusted basis for her partnership interest on July 1 of the;current year is $170,000. On that date, she receives a proportionate;nonliquidating distribution of the following assets;Partnership?s;Basis in Asset;Asset?s;Fair Market Value;Cash;$ 90,000;$ 90,000;Inventory;110,000;140,000;Land (held;for investment);100,000;160,000;a.;Calculate;Chelsea?s recognized gain or loss on the distribution, if any.;b.;Calculate;Chelsea?s basis in the inventory received.;c.;Calculate;Chelsea?s basis in land received. The land is a capital asset.;d.;Calculate;Chelsea?s basis for her partnership interest after the distribution.;1225S,90;Melissa is a partner in a continuing partnership. At the end of the current;year, the partnership makes a proportionate, nonliquidating distribution to;Melissa of $50,000 cash, inventory (basis of $22,000, fair market value of;$20,000), and land (basis of $30,000, fair market value of $60,000). Melissa?s;basis in the partnership interest was $90,000 before the distribution. What is;Melissa?s basis in the inventory, land, and partnership interest following the;distribution?;1226S,91;In a proportionate liquidating distribution in which the partnership is;liquidated, Greg received cash of $20,000, inventory (basis of $2,000, fair;market value of $3,000), and a capital asset (basis and fair market value of;$4,000). Immediately before the distribution, Greg?s basis in the partnership;interest was $30,000.;a.;How much;gain or loss will Greg recognize on the distribution?;b.;What is;Greg?s basis in the inventory and the capital asset?;1227S,92;The JIH Partnership distributed the following assets to partner James in a;proportionate liquidating distribution in which the partnership is liquidated;$25,000 cash, land parcel A (basis of $5,000, fair market value of $30,000);and land parcel B (basis of $5,000, fair market value of $15,000). James?s;basis in his partnership interest was $85,000 immediately before the;distribution.;a.;How much gain;or loss will James recognize on the distribution?;b.;What basis;will James allocate to parcel A and parcel B?;1228S,93;Josh has a 25% capital and profits interest in the calendar-year GDJ;Partnership. His adjusted basis for his partnership interest on October 15 of;the current year is $300,000. On that date, the partnership liquidates and makes;a proportionate distribution of the following assets to Josh.;Partnership?s;Basis in Asset;Asset?s;Fair Market Value;Cash;Inventory;$ 70,000;120,000;$ 70,000;150,000;a.;Calculate;Josh?s recognized gain or loss on the liquidating distribution, if any.;b.;How would;your answer to a. change if the partnership also distributed a small parcel;of land it had held for investment to Josh? Assume the land has a $5,000;adjusted basis (FMV is $8,000) to the partnership.;1229S,94;The December 31, 2011, balance sheet of the BCD General Partnership reads as;follows.;Basis;FMV;Cash;Receivables;Capital assets;Total;Ben, capital;Christina, capital;Danielle, capital;Total;$210,000;?0? 42,000;$252,000$ 84,000;84,000 84,000;$252,000;$210,000;120,000 69,000;$399,000;$133,000;133,000 133,000;$399,000;Each partner shares in 1/3 of the partnership capital, income, gain, loss;deduction and credit. Capital is not a material income-producing factor to the;partnership. On December 31, 2011, general partner Christina receives a;distribution of $140,000 cash in liquidation of her partnership interest under;? 736. Nothing is stated in the partnership agreement about goodwill.;Christina?s outside basis for the partnership interest immediately before the;distribution is $84,000.;How much is Christina?s recognized gain from the distribution and what is the;character of the gain?;1230S,95;The December 31, 2011, balance sheet of the DBW General Partnership is as;follows;Basis;FMV;Cash;Receivables;Capital assets;Total;Dana, capital;Brooke, capital;Whitney, capital;Total;$240,000;?0? 90,000;$330,000$110,000;110,000 110,000;$330,000;$240,000;75,000 150,000;$465,000;$155,000;155,000 155,000;$465,000;The partners share equally in partnership capital, income, gain, loss;deduction, and credit and capital is not a material income-producing factor. On;December 31, 2011, general partner Dana receives a distribution of $155,000;cash in liquidation of her interest under ? 736. Dana?s outside basis for the;partnership interest immediately before the distribution is $110,000. What is;Dana?s gain or loss on the distribution and its character?;1231S,96;Susan is a one-fourth limited partner in the SJ Partnership in which capital is;not a material income-producing factor. Partnership assets consist of land;(fair market value of $100,000, basis of $80,000), accounts receivable (fair;market value of $100,000, basis of $0) and cash of $200,000. SJ distributes;$100,000 of the cash to Susan in liquidation of her interest. Susan?s basis in;the partnership interest was $70,000 immediately before the distribution. How;much gain or loss does Susan recognize and what is its character? How much can;the partnership deduct?;1232S,97;On August 31 of the current tax year, the balance sheet of the RBD General;Partnership is as follows;Basis;FMV;Cash;Receivables;Capital assets;Total;Nonrecourse debt;Rachel, capital;Barry, capital;Dale, capital;Total;$150,000;?0? 600,000;$750,000$150,000;200,000;200,000 200,000;$750,000;$150,000;90,000 660,000;$900,000;$150,000;250,000;250,000 250,000;$900,000;On that date, Rachel sells her one-third partnership interest to Lisa for;$300,000, including cash and relief of Rachel?s share of the nonrecourse debt.;The nonrecourse debt is shared equally among the partners. Rachel?s outside;basis for her partnership interest is $250,000. How much capital gain and/or;ordinary income will Rachel recognize on the sale?;1233S,98;Hannah sells her 25% interest in the HIJK Partnership to Alyssa for $120,000;cash. At the end of the year prior to the sale, Hannah?s basis in HIJK was;$70,000. The partnership allocates $15,000 of income to Hannah for the portion;of the year she was a partner. On the date of the sale, the partnership assets;and the agreed fair market values were as follows.;Basis;FMV;Cash;Accounts Receivable;Land;Total;$100,000;?0? 240,000$340,000;$100,000;80,000 220,000$400,000;Determine the amount and character of any gain that Hannah recognizes on the;sale.;1234S,99;The December 31, 2011, balance sheet of the calendar-year JKL Partnership reads;as follows.;Basis;FMV;Cash;Capital asset (nondepreciable);Total;Jan, capital;Ken, capital;Laura, capital;Total;$24,000 33,000$57,000;$19,000;19,000 19,000$57,000;$ 24,000 105,000$129,000;$ 43,000;43,000 43,000$129,000;Each partner shares in 1/3 of the partnership capital, income, gain, loss;deduction and credit. On December 31, 2011, Jan sells her 1/3 partnership;interest to Jennifer for $43,000 cash. Assume the partnership makes a ? 754;election for 2010.;a.;What is the;amount of Jennifer?s ?step-up? adjustment under ? 743(b)?;b.;If the;nondepreciable capital asset is sold the next year for $120,000, determine;the amount of gain that Jennifer will recognize on her tax return because of;the sale.;1235S100;Cindy, a 20% general partner in the CDE Partnership, wants to retire and has;approached the other partners about having the partnership buy her out. The;partnership is a cash basis, service oriented partnership in which Cindy is an;active partner. The partnership assets consist primarily of unrealized;receivables and cash. The partnership also has substantial going concern value;(goodwill) which is probably its most valuable asset. The other partners in the;partnership are also active in the business and are not related to Cindy.;Discuss from Cindy?s viewpoint how you would structure the liquidation of her;interest under ? 736. Answer as if you are her advocate. Do you think the other;partners will agree with this structure? If not, what structure would they;prefer?;1236S101;Your client has operated a sole proprietorship for several years, and is now;interested in raising capital for expansion. He is considering forming either a;C corporation or an LLC.;a.;Describe the;treatment of an LLC and discuss any advantages the LLC offers over the C;corporation.;b.;Assume;instead the client has previously operated as a C corporation. Describe the;tax consequences of converting to an LLC.

 

Paper#59239 | Written in 18-Jul-2015

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