[jeff]

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[Kenada]

Hello Ninja's

Can I have you please help me with these partnership Questions.

I will start with Q 57 from the Wiley book.

Stone and Frazier decided to terminae the woodwest P/ship as of Dec 31. On that Date the Woodwest B/S was as follows:

Cash 2000.00

Land(adjusted basis) 2000.00

Capital – Stone 3000.00

Capital – Frazier 1000.00

The FMV of land was 3000.00. Frazier's outside basis in the partnership was 1,200.00. Upon liquidation, Fraziers received 1,500.00 Cash. What gain should Frazier recognize?

A 0

B 250

C 300

D 500

Please help me understand why you picked your answer as I was confused between two possible options.

FAR 05/27/14; 786/110 - Done !

[gottapassb4b4]

@insiyah

I think the answer is C 300. The gain on liquidation of a partnership is limited to cash received in excess of basis being the reason I choose C. Is that right?

[gottapassb4b4]

@insiyah

I think the answer is C 300. The gain on liquidation of a partnership is limited to cash received in excess of basis being the reason I choose C. Is that right?

[Kenada]

yes it is C.

What i got confused here is it says on the B/S his capital was 1000.00 i thought that would be his ending basis as of Dec 31. So in the exam would you know to pick 1200.00 instead of 1000.00 ?

FAR 05/27/14; 786/110 - Done !

[Kenada]

yes it is C.

What i got confused here is it says on the B/S his capital was 1000.00 i thought that would be his ending basis as of Dec 31. So in the exam would you know to pick 1200.00 instead of 1000.00 ?

FAR 05/27/14; 786/110 - Done !

[gottapassb4b4]

Capital account is just your basis in partnership assets and can be referred to as “inside basis”. It doesn't include your share of the partnership liabilities, this is reflected in the “outside basis” which in this case was the 1200.

Essentially the partner's share of the assets was 1000 and their share of the liabilities was 200. At least I think that is how it works

[gottapassb4b4]

Capital account is just your basis in partnership assets and can be referred to as “inside basis”. It doesn't include your share of the partnership liabilities, this is reflected in the “outside basis” which in this case was the 1200.

Essentially the partner's share of the assets was 1000 and their share of the liabilities was 200. At least I think that is how it works

[Kenada]

Oh I see…Okay that makes senses. Thank you 🙂

FAR 05/27/14; 786/110 - Done !

[Kenada]

Oh I see…Okay that makes senses. Thank you 🙂

FAR 05/27/14; 786/110 - Done !

[Kenada]

My next partnership Question 65 and 66 they are linked together

Mike Reed a partner in Post Co received the following distribution from Post:

Cash basis 11,000 FMV 11,000

Inventory Basis 5000 FMV 12,500

Before this distribution Reeds Basis in post was 25,000.

65.If this Distribution were non liquidating, Reeds basis for the inventory would be

A 14,000

B 12 ,500

C 5,000

D 1,500

66. If this distribution were in complete liquidation of Reed interest in Post, Reeds recognized gain or loss resulting from the distribution would be

A 7,500 gain

B 9,000 Loss

C 1,500 Loss

D 0

I got stuck on 66. Help 🙂

FAR 05/27/14; 786/110 - Done !

[Kenada]

My next partnership Question 65 and 66 they are linked together

Mike Reed a partner in Post Co received the following distribution from Post:

Cash basis 11,000 FMV 11,000

Inventory Basis 5000 FMV 12,500

Before this distribution Reeds Basis in post was 25,000.

65.If this Distribution were non liquidating, Reeds basis for the inventory would be

A 14,000

B 12 ,500

C 5,000

D 1,500

66. If this distribution were in complete liquidation of Reed interest in Post, Reeds recognized gain or loss resulting from the distribution would be

A 7,500 gain

B 9,000 Loss

C 1,500 Loss

D 0

I got stuck on 66. Help 🙂

FAR 05/27/14; 786/110 - Done !

[gottapassb4b4]

For 65. the answer I got was C. 5000. And for 66 I got D 0. Not 100% on this one though, because I recognize that in 66 the inventory is a “hot asset” but since the value doesn't exceed basis I don't think any gain will be recognized, is this correct?

[gottapassb4b4]

For 65. the answer I got was C. 5000. And for 66 I got D 0. Not 100% on this one though, because I recognize that in 66 the inventory is a “hot asset” but since the value doesn't exceed basis I don't think any gain will be recognized, is this correct?

[Kenada]

Yes 65 Is 5000.00

66 is 9000 Loss.

I thought Inventory in a Liquidation is supposed to be at FMV… Non-liquidating was at Basis. So i am confused now.

FAR 05/27/14; 786/110 - Done !

[Kenada]

Yes 65 Is 5000.00

66 is 9000 Loss.

I thought Inventory in a Liquidation is supposed to be at FMV… Non-liquidating was at Basis. So i am confused now.

FAR 05/27/14; 786/110 - Done !

[Author]

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