AJ is a 30 percent partner in the Trane Partnership, a calendar year end entity. On January 1, AJ has an outside basis in his interest in Trane of $77, 500, which includes his share of the $53, 600 of partnership liabilities. Trane generates $43,800 of income during the year and does not make any changes to its liabilities. On December 31, Trane makes a proportionate distribution of the following assets to AJ to terminate his partnership interest: Tax Basis FMV Inventory $ 59, 500 $ 70, 400 Land 31,800 25,900 Totals $ 91,300 $96, 300 Note: Leave no answer blank. Enter zero if applicable. a. What are the tax consequences ( gain or loss, basis adjustments) of the distribution to Trane? b. What are the amount and character of any recognized gain or loss to AJ? c. What is AJ's basis in the distributed assets? d. If AJ sells the inventory four years after the distribution for $75, 400, what are the amount and character of his recognized gain or loss?

AJ is a 30 percent partner in the Trane Partnership, a calendar year end entity. On January 1, AJ has an outside basis in his interest in Trane of $77, 500, which includes his share of the $53, 600 of partnership liabilities. Trane generates $43,800 of income during the year and does not make any changes to its liabilities. On December 31, Trane makes a proportionate distribution of the following assets to AJ to terminate his partnership interest: Tax Basis FMV Inventory $ 59, 500 $ 70, 400 Land 31,800 25,900 Totals $ 91,300 $96, 300 Note: Leave no answer blank. Enter zero if applicable. a. What are the tax consequences ( gain or loss, basis adjustments) of the distribution to Trane? b. What are the amount and character of any recognized gain or loss to AJ? c. What is AJ's basis in the distributed assets? d. If AJ sells the inventory four years after the distribution for $75, 400, what are the amount and character of his recognized gain or loss?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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