By the end of 2022, Reed has had a falling out with Carrie and Doug and has decided to leave the partnership. He has located a potential buyer for his partnership interest, Indie Ruff. Indie has agreed to purchase Reed's interest in Slicenhook for $730,000 in cash and the assumption of Reed's share of Slicenhook's debt. Carrie and Doug, however, are not certain that admitting Indie to the partnership is such a good idea. They want to consider having Slicenhook liquidate Reed's interest on January 1, 2023. As of January 1, 2023, Slicenhook has the following assets: Cash Investment-tax exempts Investment stock Equipment-net of depreciation Building-net of depreciation. Land Total Cash Investment stock Tax Basis $ 876,800 15,000 45,000 333,000 1,146,000 460,000 $2,875,800 Total Carrie and Doug propose that Slicenhook distribute the following to Reed in complete liquidation of his partnership interest: Equipment-$200,000 cost, net of depreciation FMV $ 876,800 18,000 45,000 600,000 1,440,000 510,000 $ 3,489,800 Tax Basis $ 485,000 45,000 111,000 $ 641,000 FMV $ 485,000 45,000 200,000 $ 730,000 Slicenhook has not purchased or sold any equipment since its original purchase just after formation. g-1. If Reed sells his interest in Slicenhook to Indie Ruff, what are the amount and character of his recognized gain or loss? ? What is Indie's basis in the partnership interest?
By the end of 2022, Reed has had a falling out with Carrie and Doug and has decided to leave the partnership. He has located a potential buyer for his partnership interest, Indie Ruff. Indie has agreed to purchase Reed's interest in Slicenhook for $730,000 in cash and the assumption of Reed's share of Slicenhook's debt. Carrie and Doug, however, are not certain that admitting Indie to the partnership is such a good idea. They want to consider having Slicenhook liquidate Reed's interest on January 1, 2023. As of January 1, 2023, Slicenhook has the following assets: Cash Investment-tax exempts Investment stock Equipment-net of depreciation Building-net of depreciation. Land Total Cash Investment stock Tax Basis $ 876,800 15,000 45,000 333,000 1,146,000 460,000 $2,875,800 Total Carrie and Doug propose that Slicenhook distribute the following to Reed in complete liquidation of his partnership interest: Equipment-$200,000 cost, net of depreciation FMV $ 876,800 18,000 45,000 600,000 1,440,000 510,000 $ 3,489,800 Tax Basis $ 485,000 45,000 111,000 $ 641,000 FMV $ 485,000 45,000 200,000 $ 730,000 Slicenhook has not purchased or sold any equipment since its original purchase just after formation. g-1. If Reed sells his interest in Slicenhook to Indie Ruff, what are the amount and character of his recognized gain or loss? ? What is Indie's basis in the partnership interest?
Chapter3: Income Sources
Section: Chapter Questions
Problem 56P
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Transcribed Image Text:By the end of 2022, Reed has had a falling out with Carrie and Doug and has decided to leave the partnership. He has
located a potential buyer for his partnership interest, Indie Ruff. Indie has agreed to purchase Reed's interest in Slicenhook
for $730,000 in cash and the assumption of Reed's share of Slicenhook's debt. Carrie and Doug, however, are not certain
that admitting Indie to the partnership is such a good idea. They want to consider having Slicenhook liquidate Reed's
interest on January 1, 2023. As of January 1, 2023, Slicenhook has the following assets:
Cash
Investment-tax exempts
Investment stock
Equipment-net of depreciation
Building-net of depreciation
Land
Total
Cash
Investment stock
Tax Basis
$ 876,800
15,000
45,000
333,000
1,146,000
460,000
$2,875,800
Total
Carrie and Doug propose that Slicenhook distribute the following to Reed in complete liquidation of his partnership
interest:
Equipment-$200,000 cost, net of depreciation
FMV
$ 876,800
18,000
45,000
600,000
1,440,000
510,000
$3,489,800
Tax Basis
$ 485,000
45,000
111,000
$641,000
FMV
$ 485,000
45,000
200,000
$ 730,000
Slicenhook has not purchased or sold any equipment since its original purchase just after formation.
g-1. If Reed sells his interest in Slicenhook to Indie Ruff, what are the amount and character of his recognized gain or loss?
g-2. What is Indie's basis in the partnership interest?
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