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Critical Thinking: Partnership Formation to Dissolution (100 Points);Timothy is a 35 percent partner in the Total Partnership, a calendar-year-end entity. Timothy has an outside basis in his interest in Total of $198,000, which includes his share of the $45,000 of partnership liabilities. On December 31, Total makes a proportionate distribution of the following assets to Timothy;Basis;FMV;Cash;$50,000;$50,000;Inventory;65,000;75,000;Land;50,000;65,000;Totals;$165,000;$180,000;For an operating distribution, outline the tax consequences (amount and character of recognized gain or loss, basis in distributed assets) of the distribution to Timothy.;For a liquidating distribution, outline the tax consequences (amount and character of recognized gain or loss, basis in distributed assets) of the distribution to Timothy.;Discuss the similarities and differences between the tax consequences of the operating distribution and the tax consequences of the liquidation distribution.

 

Paper#78872 | Written in 18-Jul-2015

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