Question 1

Tenika has a $10,000 basis in her interest in the TF Partnership and no remaining precontribution gain immediately before receiving a current distribution that consisted of $4,000 in money,plastic tubes held in inventory with a $3,000 basis to the partnership and an FMV of $3,375,and drip irrigation pipe held as inventory with a $6,000 basis to the partnership and an FMV of $5,000.What is Tenika's basis for the plastic tubes and drip irrigation pipe?

Accepted Answer

D)
 11ea7e81_9d48_b456_9a0a_e9e01303717d_TB1259_00 *$3,000 ÷ ($3,000 + $5,000) × 2,000 = 750
**$5,000 ÷ ($3,000 + $5,000) × 2,000 = 1,250

Question 2

Identify which of the following statements is true.

Accepted Answer

A

Question 3

If a distribution occurs within ________ years of the contribution date,in a nonliquidating distribution that does not qualify for Sec.751 treatment,the distribution event may trigger a precontribution gain or loss.

Accepted Answer

C

Question 4

In a current distribution,the partner's basis in the partnership interest is reduced by the amount of money received and by the partnership's bases in the distributed property.

Accepted Answer

This is true, as the partner's basis in the partnership interest is reduced by the amount of money received as well as by the partnership's basis in the distributed property. This is done to ensure that the partner's basis in the partnership interest reflects the economic substance of the distribution.

Question 5

Becky has a $24,000 basis in her partnership interest.She receives a current distribution of $4,000 cash,unrealized receivables with a basis of $12,000 and an FMV of $16,000,and land held as an investment with a basis of $3,000 and an FMV of $8,000.The partners' relative interests in the Sec.751 assets do not change as a result of the current distribution.The basis of her partnership interest following the distribution is

Accepted Answer

A)
 11ea7e81_9d47_c9ef_9a0a_75e3e4fa97a8_TB1259_00

Question 6

A partner's holding period for property distributed as a current distribution begins on the date of distribution.

Accepted Answer

The partner's holding period for the property includes the period the property was held by the partnership if the property was a capital asset or a Section 1231 asset in the hands of the partnership.

Question 7

Helmut contributed land with a basis of $5,000 and an FMV of $10,000 to the HG Partnership five years ago to acquire a 50% partnership interest.This year the land is distributed to another partner,Gail,when its FMV is $11,000.No other distributions have been made since Helmut became a partner.When the land is distributed to Gail,Helmut recognizes a gain of

Accepted Answer

The answer of Helmut contributed land with a basis of...

Question 8

A partnership cannot recognize a gain or loss on a current distribution.

Accepted Answer

A partnership can recognize a gain or loss on a current distribution, depending on the fair market value of the distributed property compared to its adjusted basis.

Question 9

John has a basis in his partnership interest of $30,000.He receives a current distribution of $6,000 cash,unrealized receivables (FMV $11,000,basis $10,000),inventory (FMV $8,000,basis $4,000),and investment land (FMV $7,000,basis $6,000).The partners' relative interest in the Sec.751 assets do not change as a result of the current distribution.His basis in the land is

Accepted Answer

B)
 11ea7e81_9d47_f100_9a0a_d763aee4d253_TB1259_00

Question 10

Susan contributed land with a basis of $6,000 and an FMV of $10,000 to the SH Partnership two years ago to acquire her partnership interest.This year,the land is distributed to Harry when its FMV is $11,000.No other distributions have been made since Susan became a partner.When the land is distributed,the partnership's basis in the land immediately before distribution is increased by

Accepted Answer

The basis of the distributed property to the partner is equal to the partnership's basis in the property immediately before the distribution. In this case, the partnership's basis in the land is $6,000 (Susan's basis). However, since the FMV of the land at the time of distribution is $11,000, the partnership will recognize a $5,000 gain ($11,000 FMV - $6,000 basis = $5,000 gain). This gain is allocated to the partners according to their profit and loss sharing ratios. Since the gain is allocated to Harry, the partnership's basis in the land is increased by the amount of the gain allocated to Harry, which is $4,000 ($5,000 gain x 80% Harry's profit and loss sharing ratio = $4,000). Therefore, the correct answer is C) $4,000.

Question 11

The total bases of all distributed property in the partner's hands following a nonliquidating distribution is limited to

Accepted Answer

The total bases of all distributed property in the partner's hands following a nonliquidating distribution is limited to the partner's predistribution basis in his partnership interest. This means that the partner cannot recognize a gain on the distribution unless the FMV of the distributed property exceeds his or her basis in the partnership interest. This is because the partner has already taken into account his or her share of partnership income, gain, loss, deduction, or credit.

Question 12

Bart has a partnership interest with a $32,000 basis.He receives a current distribution of $6,000 cash,unrealized receivables (FMV $9,000,basis $10,000),inventory (FMV $8,000,basis $4,000),investment land (FMV $7,000,basis $4,000),and building (FMV $20,000,basis $8,000).No depreciation recapture applies with respect to the building.The partners' relative interests in the Sec.751 assets do not change as a result of the current distribution.Bart's basis in the building is

Accepted Answer

D)
 11ea7e81_9d49_0278_9a0a_0fa0849ef3d1_TB1259_00 × $12,000 = $8,000 basis for building*
 11ea7e81_9d49_0279_9a0a_cba43cf38730_TB1259_00

Question 13

If a partnership asset with a deferred precontribution gain is distributed within seven years of acquisition in a nonliquidating distribution to a partner who did not contribute the asset,the precontribution gain must be recognized by the contributing partner.

Accepted Answer

According to the rules of Section 704(c), if a partnership asset with a deferred precontribution gain is distributed within seven years of acquisition in a nonliquidating distribution to a partner who did not contribute the asset, the precontribution gain must be recognized by the contributing partner.

Question 14

Danielle has a basis in her partnership interest of $12,000.She receives a current distribution of $8,000 cash and equipment with a basis of $7,000.There is no potential gain under Sec.737.What is her basis in the equipment?

Accepted Answer

When receiving a distribution of property, the basis of the property received is the lesser of the partnership's adjusted basis in the property or the partner's adjusted basis in their partnership interest. 
In this case, the adjusted basis of the equipment is $7,000, which is less than Danielle's adjusted basis in her partnership interest of $12,000. Therefore, her basis in the equipment is $7,000. However, since she received cash distributions that exceeded her basis in her partnership interest, she will also have a capital gain of $1,000 ($8,000 received - $7,000 basis in partnership interest).

Question 15

Mirabelle contributed land with a $5,000 basis and a $9,000 FMV to MS Partnership four years ago.This year the land is distributed to Sergio,another partner in the partnership.At the time of distribution,the land had a $12,000 FMV.How much gain should Mirabelle and Sergio recognize?

Accepted Answer

Mirabelle will recognize gain equal to the difference between the FMV at the time of distribution ($12,000) and her basis ($5,000), which is $7,000. Sergio will take a carryover basis equal to Mirabelle's basis before the distribution ($5,000). Therefore, Sergio will have no gain upon receiving the land. The total gain recognized will be $7,000.

Question 16

A new partner,Gary,contributes cash and assumes a share of partnership liabilities.Diane's capital,profits,and loss interest in the partnership is reduced by 5% due to the admission of Gary.The Sec.751 rules do not apply.Partnership liabilities at the time Gary is admitted are $200,000,and all of the liabilities are recourse debts for which the partners share the economic risk of loss in the same way they share partnership profits.Diane's basis in the partnership interest prior to Gary's admission is $5,000.Due to the admission of Gary,partner Diane has

Accepted Answer

C) Diane's reduction in partnership liabilities by the addition of Gary is $10,000 (0.05 × $200,000 = $10,000). Because the $10,000 reduction is deemed cash distributed, Diane has a gain equal to the excess of the cash deemed distributed over her basis:
 11ea7e81_9d46_df8a_9a0a_51f821ed60c6_TB1259_00 The new basis of Diane's partnership interest is zero.

Question 17

Identify which of the following statements is true.

Accepted Answer

A) This statement is false because if the partnership distributes the contributed asset back to the contributing partner in a nonliquidating distribution, the precontribution gain is not recognized at that time. B) The partner's basis in the partnership interest is reduced by the partnership's basis in the property distributed, not the FMV. C) Reducing the basis of the partnership interest to zero does not automatically terminate the partner's interest in the partnership; it may result in a negative capital account, but the interest itself is not terminated solely by this action.

Question 18

Tenika has a $10,000 basis in her interest in the TF Partnership and no remaining precontribution gain immediately before receiving a current distribution that consisted of $4,000 in money,plastic tubes held in inventory with a $3,000 basis to the partnership and an FMV of $3,375,and drip irrigation pipe held as inventory with a $6,000 basis to the partnership and an FMV of $5,000.What is the basis in Tenika's hands of the distributed property?

Accepted Answer

B)
 11ea7e81_9d48_3f21_9a0a_673919f8e95c_TB1259_00

Question 19

Mirabelle contributed land with a $5,000 basis and a $9,000 FMV to MS Partnership four years ago.This year the land is distributed to Sergio,another partner in the partnership.At the time of distribution,the land had a $12,000 FMV.What is the impact of the distribution on Mirabelle's partnership basis?

Accepted Answer

When property is distributed to a partner, the basis of the distributing partner's interest decreases by the portion of the partnership's basis attributable to the distributed property. In this case, Mirabelle's basis in the partnership will decrease by the FMV of the property distributed to Sergio ($12,000), but her basis in the property before distribution was only $9,000. Therefore, her basis in the partnership will decrease by $3,000 ($12,000 - $9,000). Mirabelle's original basis in the partnership ($5,000) is not relevant for this calculation. Therefore, the correct answer is B, a $4,000 increase in partnership basis.

Question 20

Carlos has a basis in his partnership interest of $30,000.He receives a current distribution of $6,000 cash,unrealized receivables (FMV $11,000,basis $10,000),inventory (FMV $8,000,basis $4,000),land held as an investment (FMV $7,000,basis,$6,000),and building (FMV $21,000,basis $9,000).The partners' relative interests in the Sec.751 assets do not change as a result of the current distribution.Carlos's basis in the building is

Accepted Answer

B)
 11ea7e81_9d48_db67_9a0a_f7dc64df4997_TB1259_00 [$9,000/($9,000 + $6,000)] × $10,000 = $6,000

Quiz 10: Special Partnership Issues

Identify which of the following statements is true.

If a distribution occurs within ________ years of the contribution date,in a nonliquidating distribution that does not qualify for Sec.751 treatment,the distribution event may trigger a precontribution gain or loss.

In a current distribution,the partner's basis in the partnership interest is reduced by the amount of money received and by the partnership's bases in the distributed property.

A partner's holding period for property distributed as a current distribution begins on the date of distribution.

A partnership cannot recognize a gain or loss on a current distribution.

The total bases of all distributed property in the partner's hands following a nonliquidating distribution is limited to

If a partnership asset with a deferred precontribution gain is distributed within seven years of acquisition in a nonliquidating distribution to a partner who did not contribute the asset,the precontribution gain must be recognized by the contributing partner.

Danielle has a basis in her partnership interest of $12,000.She receives a current distribution of $8,000 cash and equipment with a basis of $7,000.There is no potential gain under Sec.737.What is her basis in the equipment?

Mirabelle contributed land with a $5,000 basis and a $9,000 FMV to MS Partnership four years ago.This year the land is distributed to Sergio,another partner in the partnership.At the time of distribution,the land had a $12,000 FMV.How much gain should Mirabelle and Sergio recognize?

Identify which of the following statements is true.