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Exam 10: Dispositions of Partnership Interests and Partnership Distributions

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Question 31

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Under what conditions will a partner recognize a gain in a liquidating distribution?

A) When a partnership distributes only money and the amount of the distribution exceeds the partner's outside basis.
B) When a partnership distributes only money and the amount of the distribution is less than the partner's outside basis.
C) When a partnership distributes money, hot assets, and other property and the amount of the distribution exceeds the partner's outside basis.
D) When a partnership distributes money, hot assets, and other property and the amount of the distribution is less than the partner's outside basis.

E) B) and C)
F) All of the above

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Question 32

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Esther and Elizabeth are equal partners in the EE Partnership. The partners formed the partnership seven years ago by contributing cash. Prior to any distributions, the partners each have a $40,000 basis in their partnership interests including their share of partnership liabilities. On December 31, EE partnership repays $50,000 of debt. What is the amount and character of Esther's recognized gain or loss? What is Esther's remaining basis in EE?

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Esther does not recognize any gain or lo...

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Question 33

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Which of the following assets would not be classified as hot assets?

Nadine Fimple is a one-half partner in the NL Partnership with equal inside and outside bases. On January 1, NL distributes accounts receivable with a fair value of $100,000 to Nadine as an operating distribution. NL's balance sheet as of January 1 is as follows: What is the amount and character of Nadine's recognized gain or loss on the distribution?

Randolph is a 30% partner in the RD Partnership. On January 1, RD distributes $15,000 cash, inventory with a fair value of $20,000 (inside basis of $10,000) , and a parcel of land with a fair value of $10,000 (inside basis of $5,000) to Randolph in complete liquidation of his interest. RD has no liabilities at the date of the distribution. Randolph's basis in his RD partnership interest his is $37,000. What is Randolph's basis in the distributed inventory and land?

Doris owns a 1/3 capital and profits interest in the calendar-year DB Partnership. Her adjusted basis for her partnership interest on July 1 of the current year is $20,000. On that date, she receives an operating distribution of her share of partnership assets shown below: What is the amount and character of Doris' gain or loss on the distribution? What is her basis in the distributed assets?

Riley is a 50% partner in the RF Partnership and has an outside basis of $56,000 at the end of the year prior to any distributions. On December 31, Riley receives a proportionate operating distribution of $6,000 cash and a parcel of land with a $14,000 fair value and an $8,000 basis to RF. What is the amount and character of Riley's recognized gain or loss and what is his basis in his partnership interest?

In which type of distribution may a partner recognize a loss on the distribution?

Heidi and Teresa are equal partners in the HT Partnership. The partners formed the partnership seven years ago by contributing cash. Prior to any distributions, the partners each have a $50,000 basis in their partnership interests. On December 31, the partnership makes a proportionate operating distribution to Teresa of $40,000 cash and stock with a fair value of $20,000 (inside basis of $7,000). What is the amount and character of Teresa's recognized gain or loss? What is Teresa's remaining basis in HT?

Victor is a 1/3 partner in the VRX partnership with an outside basis of $156,000 on January 1. Victor sells his partnership interest to Raj on January 1ˢᵗ for $200,000 cash. The VRX Partnership has the following assets and no liabilities as of January 1: The equipment was purchased for $360,000 and the partnership has taken $90,000 of depreciation. The stock was purchased 7 years ago. What is the amount and character of Victor's gain or loss on the sale of his partnership interest?

Randolph is a 30% partner in the RD Partnership. On January 1, RD distributes $15,000 cash and inventory with a fair value of $20,000 (inside basis of $10,000) to Randolph in complete liquidation of his interest. RD has no liabilities at the date of the distribution. Randolph's basis in his RD partnership interest is $27,000. What is the amount and character of Randolph's gain or loss on the distribution?

Which of the following statements regarding hot assets for purposes of disproportionate distributions is False?

Unrealized receivables include accounts receivable for which of the following partnerships?

Operating distributions completely terminate a partner's interest in the partnership.

Hot assets include assets except cash, capital assets and §1231 assets.

Katrina is a one-third partner in the KYR partnership (calendar year-end). Katrina decides she wants to exit the partnership and receives a proportionate distribution to liquidate her partnership interest on January 1. The partnership has no liabilities and holds the following assets as of January 1: Katrina receives one-third of each of the partnership assets. She has a basis in her partnership interest of $110,000. What is the amount and character of any recognized gain or loss to Katrina? What is Katrina's basis in the distributed assets?

Randolph is a 30% partner in the RD Partnership. On January 1, RD distributes $15,000 cash, an investment with a fair value of $20,000 (inside basis of $10,000) , and a parcel of land with a fair value of $10,000 (inside basis of $5,000) to Randolph in complete liquidation of his interest. RD has no liabilities at the date of the distribution. Randolph's basis in his RD partnership interest is $48,000. What is Randolph's basis in the distributed investment and land?

In the sale of a partnership interest, a selling partner will recognize ordinary income (rather than capital gain) when the partnership assets include cash and land held for 5 years as an investment.

Heidi and Teresa are equal partners in the HT Partnership. The partners formed the partnership seven years ago by contributing cash. Prior to any distributions, the partners each have a $50,000 basis in their partnership interests. On December 31, the partnership makes a pro-rata operating distribution to Heidi of $60,000 cash. What is the amount and character of Heidi's recognized gain or loss? What is Heidi's remaining basis in HT?

The PW partnership's balance sheet includes the following assets immediately before it liquidates: In complete liquidation, PW distributes the cash to Pamela and the unrealized receivables to Wade (equal partners) . Pamela and Wade each have an outside basis in PW equal to $5,000. PW has no liabilities at the time of the liquidation. What is the amount and character of Pamela's recognized gain or loss?