M4 Partnerships: Part 3

Question 1

Transfer of Partnership Interest. What election and adjustment is made when the goal of the adjustment is to make the transferee have an inside basis in the partnership assets equal his outside basis?

Answer 1

Section 754 Election
Section 743(b) Adjustment

Question 2

743b Basis adjustment calculation

Answer 2

Price old partner pays

Question 3

3 Ways to Liquidate a Partnership

Answer 3

1) Complete withdrawal
2) Sale of Partnership Interest
3) Death

Question 4

Liquidation of a Partnership - Complete Withdrawal. Consequences to the partner and basis amount?

Answer 4

NONTAXABLE

partnership interest *Must 0 out so basis is the amount it takes to reduce basis to 0

Question 5

Liquidation of a Partnership - Complete Withdrawal. When would a Gain be Recognized?
When would a Loss be Recognized?

Answer 5

Gain when money received > partner’s basis

Loss when $ received < partner’s basis

Question 6

Liquidation of a Partnership - Complete Withdrawal. Consequences to the partnership

Answer 6

No gain or loss

Question 7

Liquidation of a Partnership - Sale of Partnership Interest. General rule - what type of gain or loss? Calculation

Answer 7

CAPITAL
Beginning capital account
Percentage of income  up to sale
-------------------------------------
Capital account at date of sale
Percentage of liabilities
------------------------------------
Adjusted Basis
 (Cash, assumption of L, FMV Property)
--------------------------------------
Capital Gain/(Loss)

*Percentage of liabilities and assumption of liabilities NET TO ZERO

Question 8

Liquidation of a Partnership - Sale of Partnership Interest. Exception to the rule. what type of gain or loss for hot assets?

Answer 8

Ordinary income 
Hot assets include:
-unrealized receivables 
-appreciated inventory
-recapture income

Question 9

Liquidation of a Partnership. Retirement or Death of a Partner. Taxability? How much?

Answer 9

Capital Gain/Loss

Per day / per % - pro rata basis