[Tcohle]

I feel as if my weakness is liquidating and non-liquidating distributions basis and gains. I do fine on the mcq for these topics, but feel if I got a sim on it where I had to calculate exact numbers I would really struggle to figure it out. I get nervous and forget when to use FMV, Adjusted Basis, etc. So if a problem were to ask what the basis or G/L is in one of these situations I probably wouldn’t be able to get it!

Can anyone please give me advice on how they remembered these?

FAR- 5/11/15 76!!
AUD-10/31/15 63, 84!
REG-7/12/16 72
BEC-8/31/15 75!! Perfect Score!

Wiley CPAExcel Platinum
Ninja 10 pt combo for FAR/AUD/BEC

[CPA2BEE]

For Corporations, FMV is recognized by the shareholder for both non-liquidating and liquidating distributions. The taxable portion depends on E&P and any excess is return of investment. The Corp recognizes a gain of FMV in excess of basis at the time of sale. This gain should be included in E&P when determining how much is taxable to the shareholder and how much is return of investment.

For Partnerships, Adjusted Basis is used for non-liquidating distributions and FMV is used for liquidating distributions. The partner only recognizes gains to the extent that cash (not property)received exceeds the partners basis at the time of the distribution

FAR - 80
AUD - 82
BEC - 80
REG - 85

ETHICS - 90
EXPERIENCE - COMPLETE
Application for California license mailed 8/4/2016

[Bear-Bear]

^^^Dang, that's a very concise and helpful summary. I too absolutely HATE this particular topic.

[CPA2BEE]

I also often get confused and mix up the rules for gains(losses) recognized by the shareholder/partner when a distribution occurs versus when the shareholder or partner sells their interest. There is different treatment for the two, but once you get used to knowing what they are asking for I think it becomes easier

FAR - 80
AUD - 82
BEC - 80
REG - 85

ETHICS - 90
EXPERIENCE - COMPLETE
Application for California license mailed 8/4/2016

[Anonymous]

I spent most of the day on these, corporate and partnerships – and was blowing 90% of the questions – and this is my second time through the material. Not good.

I decided to try and chart things out in excel. Sorry to say I still haven't cracked the code. To me success is knowing immediately whether FMV is relevant, whether gain is recognized, how the partners basis is effected and how the partner carries the asset after the distribution. Then there's the nature of the distribution: cash, cash and property, only property, appreciated property, Section 751 (hot assets).

I like cpabee's explanation. (Oh right and then there's the rules for selling interest, haven't gotten there yet, but thanks for reminding me of the distinction.)

I think my take-away so far is:

Partnerships: Use Adjusted Basis Non-Liquidating
Corporations: Use FMV

[Bear-Bear]

^^^Yup, that's exactly how I had to start doing it. Partnership = basis, Corporation = FMV. And no gain at all on partnership distributions unless cash is given in excess of basis.

[Tcohle]

Can you explain:

“The Corp recognizes a gain of FMV in excess of basis at the time of sale. This gain should be included in E&P when determining how much is taxable to the shareholder and how much is return of investment.”

Maybe a quick example? You're saving my butt here I could not figure it out!

FAR- 5/11/15 76!!
AUD-10/31/15 63, 84!
REG-7/12/16 72
BEC-8/31/15 75!! Perfect Score!

Wiley CPAExcel Platinum
Ninja 10 pt combo for FAR/AUD/BEC

[Author]

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