Marla Davis has a $50,000 outside basis in her partnership interest. She receives the following items in partialliquidation of her partnership interest.Item Fair Value Partnership's BasisCash30,000 30,000Inventory 20,00010,000As a result of this distribution, she has---no gain or loss, a $10,000 basis in inventory, and a $10,000 outside basis in her partnership interesta $10,000 ordinary gain, a $20,000 basis in inventory, and a $0 outside basis in her partnership interesta $10,000 ordinary gain, a $20,000 basis in inventory, and a $10,000 outside basis in her partnership interestnone of the above Tina Goldsmith sells her 25% partnership interest to George Holden for $50,000. At the time of the sale, thepartnership had the following assets (listed at fair market value and inside basis):ItemFair ValueInside BasisCash100,000100,00052,000Inventory60,000Securities40,00028,000Total200,000180,000The partnership has no liabilities.Tina's outside basis at the time of sale is $45,000.Which of the following statements is FALSE?Tina has an overall gain of $5,000 on the sale.Tina has a capital gain of $5,000 on the sale.Tina has a capital gain of $3,000 and an ordinary gain of $2,000 on the sale.If the partnership has an election in place, the partnership may increase the inside basis of partnership assetsfor the benefit of new partner George to reflect the gain recognize by Tina during George's purchase.

Solution: Outside basis - money received in the final distribution in ( payable basis). If the…

Marla Davis has a $50,000 outside basis in her partnership interest. She receives the following items in partial liquidation of her partnership interest. Item Fair Value Partnership's Basis Cash 30,000 30,000 Inventory 20,000 10,000 As a result of this distribution, she has no gain or loss, a $10,000 basis in inventory, and a $10,000 outside basis in her partnership interest a $10,000 ordinary gain, a $20,000 basis in inventory, and a $0 outside basis in her partnership interest a $10,000 ordinary gain, a $20,000 basis in inventory, and a $10,000 outside basis in her partnership interest none of the above

Marla Davis has a $50,000 outside basis in her partnership interest. She receives the following items in partial liquidation of her partnership interest. Item Fair Value Partnership's Basis Cash 30,000 30,000 Inventory 20,000 10,000 As a result of this distribution, she has no gain or loss, a $10,000 basis in inventory, and a $10,000 outside basis in her partnership interest a $10,000 ordinary gain, a $20,000 basis in inventory, and a $0 outside basis in her partnership interest a $10,000 ordinary gain, a $20,000 basis in inventory, and a $10,000 outside basis in her partnership interest none of the above

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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