Justin and Kyle are equal (50%) partners. The partnership’s balance sheet (including FMV) is below. At the end of the year, Justin sold his partnership interest to Leslie for $15,000. Assets FMV Book Tax Debt Book Tax Cash 5,000 5,000 5,000 Inventory A 10,000 10,000 10,000 Inventory B 10,000 6,000 6,000 Capital Stock 5,000 11,000 11,000 Justin 16,000 16,000 Kyle 16,000 16,000 What are the tax consequences to Justin of the sale? How much of the gain/loss is capital/ordinary? Assuming the partnership has a section 754 election, what is the amount of the section 743(b) adjustment? How is it allocated among the partnership’s assets?
Justin and Kyle are equal (50%) partners. The partnership’s balance sheet (including FMV) is below. At the end of the year, Justin sold his partnership interest to Leslie for $15,000. Assets FMV Book Tax Debt Book Tax Cash 5,000 5,000 5,000 Inventory A 10,000 10,000 10,000 Inventory B 10,000 6,000 6,000 Capital Stock 5,000 11,000 11,000 Justin 16,000 16,000 Kyle 16,000 16,000 What are the tax consequences to Justin of the sale? How much of the gain/loss is capital/ordinary? Assuming the partnership has a section 754 election, what is the amount of the section 743(b) adjustment? How is it allocated among the partnership’s assets?
Justin and Kyle are equal (50%) partners. The partnership’s balance sheet (including FMV) is below. At the end of the year, Justin sold his partnership interest to Leslie for $15,000. Assets FMV Book Tax Debt Book Tax Cash 5,000 5,000 5,000 Inventory A 10,000 10,000 10,000 Inventory B 10,000 6,000 6,000 Capital Stock 5,000 11,000 11,000 Justin 16,000 16,000 Kyle 16,000 16,000 What are the tax consequences to Justin of the sale? How much of the gain/loss is capital/ordinary? Assuming the partnership has a section 754 election, what is the amount of the section 743(b) adjustment? How is it allocated among the partnership’s assets?
Justin and Kyle are equal (50%) partners. The partnership’s balance sheet (including FMV) is below. At the end of the year, Justin sold his partnership interest to Leslie for $15,000.
Assets
FMV
Book
Tax
Debt
Book
Tax
Cash
5,000
5,000
5,000
Inventory A
10,000
10,000
10,000
Inventory B
10,000
6,000
6,000
Capital
Stock
5,000
11,000
11,000
Justin
16,000
16,000
Kyle
16,000
16,000
What are the tax consequences to Justin of the sale? How much of the gain/loss is capital/ordinary?
Assuming the partnership has a section 754 election, what is the amount of the section 743(b) adjustment? How is it allocated among the partnership’s assets?
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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