Michelle has a basis in her partnership interest of $85,000. In a proportionate liquidating distribution of the partnership, Michelle receives $5,000 cash and a car (a § 1231 asset to the partnership) having a basis of $20,000 to the partnership and a fair market value of $30,000. Disregard any potential depreciation recapture on the car. If there is no gain or loss or if an amount is zero, enter "0". a. How much gain or loss, if any, may Michelle recognize on the distribution? Michelle recognizes of $fill in the blank e06c40fa4fb6fba_2. b. What basis will Michelle take in the car? $fill in the blank 26dbb006d055faf_1 c. Suppose Michelle's 18-year-old son uses the car for his personal use for one year before Michelle sells it for $28,000. (1) Does Michelle recognize any gain or loss? Michelle recognizes of $fill in the blank e4617b043069f81_2. (2) Complete the paragraph below that outlines possible tax planning procedures that should be considered. When a partner is to receive a liquidating distribution and the full basis of the interest will not be recovered, the partner's capital loss can be ensured by providing that the only asset(s) received by the partner . Another alternative would be to place the car in use in another trade or business. The loss would convert from into .

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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Michelle has a basis in her partnership interest of $85,000. In a proportionate liquidating distribution of the partnership, Michelle receives $5,000 cash and a car (a § 1231 asset to the partnership) having a basis of $20,000 to the partnership and a fair market value of $30,000. Disregard any potential depreciation recapture on the car.

If there is no gain or loss or if an amount is zero, enter "0".

a. How much gain or loss, if any, may Michelle recognize on the distribution?
Michelle recognizes of $fill in the blank e06c40fa4fb6fba_2.

b. What basis will Michelle take in the car?
$fill in the blank 26dbb006d055faf_1

c. Suppose Michelle's 18-year-old son uses the car for his personal use for one year before Michelle sells it for $28,000.

(1) Does Michelle recognize any gain or loss?
Michelle recognizes of $fill in the blank e4617b043069f81_2.

(2) Complete the paragraph below that outlines possible tax planning procedures that should be considered.
When a partner is to receive a liquidating distribution and the full basis of the interest will not be recovered, the partner's capital loss can be ensured by providing that the only asset(s) received by the partner .
Another alternative would be to place the car in use in another trade or business. The loss would convert from into .

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