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Exam 10: Dispositions of Partnership Interests and Partnership Distributions

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Question 31

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

A) Hot assets include unrealized receivables.
B) Hot assets include all inventory.
C) Hot assets include substantially appreciated inventory.
D) The definition of hot assets for distributions and sales of partnership interests differs.

E) None of the above
F) A) and B)

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Question 32

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Tyson is a 25% partner in the KT Partnership.On January 1,KT makes a proportionate distribution of $16,000 cash,inventory with a $16,000 fair value (inside basis $8,000) ,and land with a fair value of $8,000 (inside basis of $12,000) to Tyson.KT has no liabilities at the date of the distribution.Tyson's basis in KT is $24,000.What is Tyson's basis in the distributed inventory and land?

A) $8,000 inventory, $12,000 land.
B) $16,000 inventory, $8,000 land.
C) $0 inventory, $8,000 land.
D) $8,000 inventory, $0 land.

E) None of the above
F) A) and D)

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Question 33

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Scott is a 50% partner in the LS Partnership.Scott has a basis in his partnership interest of $84,000 at the end of the current year,prior to any distribution.On December 31,Scott receives an operating distribution of $9,000 cash and a parcel of land with a $21,000 fair market value and a $12,000 basis to the partnership.LS has no debt or hot assets.What is the amount and character of Scott's recognized gain or loss? What is Scott's basis in the distributed property? What is Scott's ending basis in his partnership interest?

Jason is a 25% partner in the JJM Partnership when he sells his entire interest to Lavelle for $76,000.At the time of the sale,Jason's basis in JJM is $87,000.JJM does not have any debt or hot assets.Jason's will recognize a gain of $11,000 on the sale of his partnership interest.

A disproportionate distribution is a distribution in which the partner's share of the partnership's hot assets either increases or decreases as a result of the distribution.

Tyson is a 25% partner in the KT Partnership.On January 1,KT makes a proportionate distribution of $16,000 cash and land with a $16,000 fair value (inside basis $8,000) to Tyson.KT has no liabilities at the date of the distribution.Tyson's basis in KT is $20,000.What is Tyson's basis in the distributed land?

In an operating distribution,when a partnership distributes property other than money with a basis that exceeds the partner's outside basis,the partner assigns a carryover basis to the distributed assets and recognizes a gain.

Locke is a 50% partner in the LS Partnership.Locke has a basis in his partnership interest of $84,000 at the end of the current year,prior to any distribution.On December 31,Locke receives an operating distribution of $30,000 cash.LS has no debt or hot assets.What is the amount and character of Locke's recognized gain or loss? What is Locke's ending basis in his partnership interest?

Sarah is a 50% partner in the SF Partnership and has an outside basis of $56,000 at the end of the year prior to any distributions.On December 31,Sarah receives a proportionate operating distribution of $20,000 cash.What is the amount and character of Sarah's recognized gain or loss and what is her basis in her partnership interest?

Shauna is a 50% partner in the SH Partnership.Shauna sells one-half of her interest to Kara for $60,000 cash.Just before the sale,Shauna's basis in her entire partnership interest is $150,000 including her $60,000 share of the partnership liabilities.SH's assets on the sale date are as follows: What is the amount and character of Shauna's gain or loss on the sale?

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

A partner that receives cash in an operating distribution recognizes gain if the cash distributed exceeds the partner's outside basis in the partnership immediately before the distribution.

Joan is a 30% partner in the OJT Partnership when she sells her entire interest to Crissy for $100,000 cash.At the time of the sale,Joan's basis in OJT is $63,000 (which includes her $10,000 share of OJT liabilities).OJT does not have any hot assets.What is the amount and character of Joan's gain or loss on the sale?

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 Riley's basis in the distributed property?

Which of the following statements regarding disproportionate distributions is false?

Zayde is a 1/3 partner in the ARZ partnership with an outside basis of $156,000 on January 1.Zayde sells his partnership interest to Thomas on January 1^st for $180,000 cash.The ARZ 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 3 years ago.What is the amount and character of Zayde's gain or loss on the sale of his partnership interest?

Which of the following statements regarding liquidating distributions is true?

A partner will recognize a loss from a liquidating distribution when the distribution includes only cash,unrealized receivables,and inventory and the partner's outside basis is less than the sum of the bases of the distributed assets.

Joan is a 1/3 partner in the PDJ Partnership.PDJ Partnership uses the proration method to allocate income and losses to partners with varying interests.On May 1,Joan sells her interest to Freddie for a cash payment of $75,000.On January 1,Joan's basis in PDJ is $57,000.PDJ generates $60,000 of ordinary income and $9,000 of tax-exempt income during the first four months of the year.PDJ has the following assets and no liabilities at the sale date: What is the amount and character of Joan's gain or loss on the sale?

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 1^st 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?