Special Deck-Partnership Tax 1 Flashcards
What items increase partnership basis?
Partners % share of all income, including tax-exempt; net increase in partnership liabilities
What items decrease partnership basis?
Decreased by all loss and deduction items; distributions from the partnership; net decrease in partnership liabilities
In a non-liquidating distribution when is gain recognized by the partner?
When the boot received exceed the partners basis, or when the amount received is disproportionate.
What is the general rule for distributions in a partnership?
Generally neither gain nor loss is recognized and the partnership’s former basis becomes the partners basis.
When a combination distribution (cash and property)is received how is the partner’s basis affected.
Reduced first by amount of boot (money); basis of property further reduces partner basis. IF PARTNER BASIS GOES TO ZERO THEN PROPERTY EQUALS AMOUNT REMAINING AFTER BOOT SUBTRACTED AND PARTNERSHIP BASIS IS ZERO!!!
When a distribution is land only what establishes the basis of the land?
It is the lower of the partners basis, or the land basis prior to distribution
When a partner buys into a partnership with mortgaged land how is that mathematically figured?
Total amount of debt subtracted from total partner basis and proportionate share is added back.
In a liquidating distribution can a loss ever be recognized by the partner?
Yes, if only cash, inventory, or receivables are distributed.
How is gain recognized if a person buys into a partnership using appreciated property?
If the property is mortgaged, and if the partnership’s remaining percentage of mortgage exceeds the property’s basis
List all items separately stated on Schedule K
- Capital gains and losses, 2. Section 1231 gains and losses, 3. Dividends and interest, 4. Passive activities, 5. Charitable contributions, 6. Section 179 depreciation, 7. Tax credits
A partner buys into a 25% partnership with land with a basis of $4,000 and FMV of 12,000. Partnership sells land for $20,000. How is gain recognized?
Upon sale of land by partnership, buy-in partner recognized pre-contribution gain of $8,000 (12,000-4,000=8,000) and his share (25%) of post-contribution gain (20,000-12,000=8,000*.25=2,000) for a total of $10,000 dollars recognized by partner.
A person bought into partnership of 20% for services rendered plus property with basis $15,000 and FMV $20,000. FMV of partnership interest is $38,000. What is partnership basis for new partner?
FMV $38,000 - FMV $20,000 = FMV $18,000. Since 20K is land, 18K is services rendered. 18K + 15K(property basis)= $33K(partnership basis)
Wayne sold partnership interest for $15,000 he had for 5 years. Partnership basis was $11,000. Also included his share of partnerships liabilities, $2,000. What is his gain on this sale?
$15,000 (money received) + $2,000(money saved through sale of liabilities) -$11,000 (Wayne’s basis of partnership interest) = $6,000 long term gain
Jerry and Buzz decide to terminate partnership.Assets include: Cash $2,000, Equipment (FMV $4,000) $6,000, Capital-Jerry $4,000, Capital-Buss $4,000. Buzz’s outside basis is $2,000. What is Buzz’s tax basis in property received?
$2,000(outside basis) - $1,000(half of cash) = $1,000. This becomes basis of property.
Clark sold his partnership share. Basis-$40,000, Share of partnership liabilities-$25,000, Capital account-$15,000,. Sale price was $30,000. What is Clark’s gain or loss?
$30,000 (cash received) + $25,000 (money saved through sale of liabilities) - $40,000(partnership basis) = Capital gain of $15,000
