Simon is a 30 percent partner in the SBD Partnership, a calendar-year-end entity. As of the end of this year, Simon has an outside basis in his interest in SBD of $188,000, which includes his share of the $60,000 of partnership liabilities. On December 31, SBD makes a proportionate distribution of the following assets to Simon Tax BasisFMVCash$ 40,000$ 40,000Inventory55,00065,000Land30,00045,000Totals$ 125,000$ 150,000 a1. What are the tax consequences (amount and character of recognized gain or loss) of the distribution to Simon if the distribution is an operating distribution?a2. What are the tax consequences (basis in distributed assets) of the distribution to Simon if the distribution is an operating distribution?b1. What are the tax consequences (amount and character of recognized gain or loss) of the distribution to Simon if the distribution is a liquidating distribution?b2. What are the tax consequences (basis in distributed assets after allocation) of the distribution to Simon if the distribution is a liquidating distribution?

1)a1)This distribution falls in the category of operating distributions that include property other…

Answered: b1. What are the tax consequences…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Simon is a 30 percent partner in the SBD Partnership, a calendar-year-end entity. As of the end of this year, Simon has an outside basis in his interest in SBD of $188,000, which includes his share of the $60,000 of partnership liabilities. On December 31, SBD makes a proportionate distribution of the following assets to Simon

	Tax Basis	FMV
Cash	$ 40,000	$ 40,000
Inventory	55,000	65,000
Land	30,000	45,000
Totals	$ 125,000	$ 150,000

a1. What are the tax consequences (amount and character of recognized gain or loss) of the distribution to Simon if the distribution is an operating distribution?
a2. What are the tax consequences (basis in distributed assets) of the distribution to Simon if the distribution is an operating distribution?
b1. What are the tax consequences (amount and character of recognized gain or loss) of the distribution to Simon if the distribution is a liquidating distribution?
b2. What are the tax consequences (basis in distributed assets after allocation) of the distribution to Simon if the distribution is a liquidating distribution?

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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