Eddie, Kurt, Layne, and Billy are equal (25%) partners in Seattle Records, LLP. The partnership’s current balance sheet and FMV of its assets are below. Kurt sells his partnership interest to Courtney for $2,500 cash + assumption of Kurt’s share of the partnership debt. Assume all items, including recourse debt, are shared equally. Kurt’s basis in his partnership interest = $5,500. What are the tax consequences to Kurt on the sale? How much of the gain or loss is ordinary and how much is capital? Assets FMV Book Tax Debt Book Tax Cash 2,000 2,000 2,000 Recourse 18,000 18,000 A/R 2,500 0 0 Inventory 2,500 2,000 2,000 Capital Stock 16,000 16,000 16,000 Eddie 1,000 1,000 Land 5,000 2,000 2,000 Kurt 1,000 1,000 Layne 1,000 1,000 Billy 1,000 1,000
Eddie, Kurt, Layne, and Billy are equal (25%) partners in Seattle Records, LLP. The partnership’s current balance sheet and FMV of its assets are below. Kurt sells his partnership interest to Courtney for $2,500 cash + assumption of Kurt’s share of the partnership debt. Assume all items, including recourse debt, are shared equally. Kurt’s basis in his partnership interest = $5,500. What are the tax consequences to Kurt on the sale? How much of the gain or loss is ordinary and how much is capital? Assets FMV Book Tax Debt Book Tax Cash 2,000 2,000 2,000 Recourse 18,000 18,000 A/R 2,500 0 0 Inventory 2,500 2,000 2,000 Capital Stock 16,000 16,000 16,000 Eddie 1,000 1,000 Land 5,000 2,000 2,000 Kurt 1,000 1,000 Layne 1,000 1,000 Billy 1,000 1,000
Chapter11: Invest Or Losses
Section: Chapter Questions
Problem 38P
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Question
- Eddie, Kurt, Layne, and Billy are equal (25%) partners in Seattle Records, LLP. The partnership’s current
balance sheet and FMV of its assets are below. Kurt sells his partnership interest to Courtney for $2,500 cash + assumption of Kurt’s share of the partnership debt. Assume all items, including recourse debt, are shared equally. Kurt’s basis in his partnership interest = $5,500. What are the tax consequences to Kurt on the sale? How much of the gain or loss is ordinary and how much is capital?
|
Assets |
FMV |
Book |
Tax |
Debt |
Book |
Tax |
|
Cash |
2,000 |
2,000 |
2,000 |
Recourse |
18,000 |
18,000 |
|
A/R |
2,500 |
0 |
0 |
|
|
|
|
Inventory |
2,500 |
2,000 |
2,000 |
Capital |
|
|
|
Stock |
16,000 |
16,000 |
16,000 |
Eddie |
1,000 |
1,000 |
|
Land |
5,000 |
2,000 |
2,000 |
Kurt |
1,000 |
1,000 |
|
|
|
|
|
Layne |
1,000 |
1,000 |
|
|
|
|
|
Billy |
1,000 |
1,000 |
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