A is a one-third partner in Partnership ABC. A sells his one-third interest in ABC to D on January 1 of the current year for $200,000. ABC is a cash-method, calendar year partnership. ABC does not have a section 754 election in effect. The balance sheet of ABC is as follows: Assets: Basis: FMV: Cash 10000 10000 A/R 0 50000 Inv. 30000 40000 PPE 150000 200000 Goodwill 210000 400000 Total: 400000 700000 Liabilities: 100000 100000 Capital-A 100000 200000 Capital-B. 100000 200000 Capital-C. 100000 200000 Total: 400000 700000 $150,000 of depreciation was taken on the furniture, fixtures, and equipment, and thus the original basis was $300,000. Assume for the sake of the problem that the outside basis of the partners in their partnership interests (without taking into consideration their allocable share of debt under I.R.C section 752) is equal to their capital as shown on the balance sheet. a. What is A's amount realized and gain recognized? What is the character of A's gain? b. What is D's basis for her partnership interest?
A is a one-third partner in
Assets: Basis: FMV:
Cash 10000 10000
A/R 0 50000
Inv. 30000 40000
PPE 150000 200000
Goodwill 210000 400000
Total: 400000 700000
Liabilities: 100000 100000
Capital-A 100000 200000
Capital-B. 100000 200000
Capital-C. 100000 200000
Total: 400000 700000
$150,000 of
a. What is A's amount realized and gain recognized? What is the character of A's gain?
b. What is D's basis for her partnership interest?
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