a. What are the amount and character of Cliff's recognized gain or loss?b. Will the distribution have any effect on the partnership assets?c. If Aero has a §754 election in place, what is the amount of the special basis adjustment?d. What are the amount and character of Helen's recognized gain or loss?e. Will the distribution have any effect on the partnership assets?f. If Haywood has a §754 election in place, what is the amount of the special basis adjustment? Cliff's basis in his Aero Partnership interest is $13,900. Cliff receives a distribution of $26,600 cash fromAero in complete liquidation of his interest. Aero is an equal partnership with the following balance sheet:Tax Basis FMV$ 26,600 $ 26,60011,700 11,7003,400 38,200$41,700 $ 76,500AssetsCashInvestmentLandTotalsLiabilities and capitalCapital-ChrisCapital-CliffCapital-CooperTotals$ 13,900$ 13,900$ 13,900$ 41,700

Liquidation of a partnership firm means shutting down the partnership business. In this case, the…

Answered: Cliff's basis in his Aero Partnership…

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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a. What are the amount and character of Cliff's recognized gain or loss?

b. Will the distribution have any effect on the partnership assets?

c. If Aero has a §754 election in place, what is the amount of the special basis adjustment?

d. What are the amount and character of Helen's recognized gain or loss?

e. Will the distribution have any effect on the partnership assets?

f. If Haywood has a §754 election in place, what is the amount of the special basis adjustment?

Cliff's basis in his Aero Partnership interest is $13,900. Cliff receives a distribution of $26,600 cash from
Aero in complete liquidation of his interest. Aero is an equal partnership with the following balance sheet:
Tax Basis FMV
$ 26,600 $ 26,600
11,700 11,700
3,400 38,200
$41,700 $ 76,500
Assets
Cash
Investment
Land
Totals
Liabilities and capital
Capital-Chris
Capital-Cliff
Capital-Cooper
Totals
$ 13,900
$ 13,900
$ 13,900
$ 41,700

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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