Mickey, Don, and Derek are equal (1/3rd) partners in River Avenue, LLC. Mickey’s outside basis in his partnership interest is $250. River Avenue’s balance sheet (including FMV) is below. Mickey sells his interest to Roger for $500 cash + debt assumption. *Assume that River Avenue originally purchased the machinery for $120 (i.e., accumulated depreciation = $65), and that $120 of depreciation has been taken on the building since its acquisition five years ago* Assets FMV Book Tax Debt Book Tax Cash 240 240 240 Recourse 150 150 A/R 60 75 75 Inventory 150 90 90 Capital Machinery 100 55 55 Mickey 200 200 Building 500 200 200 Don 200 200 Stock 300 90 90 Derek 200 200 Goodwill 300 0 0 What is Roger’s initial outside basis and what is the balance in his capital accounts? If a section 754 election is made, what is the amount of the section 743(b) adjustment? How is the section 743(b) adjustment allocated among the partnership’s assets?
Mickey, Don, and Derek are equal (1/3rd) partners in River Avenue, LLC. Mickey’s outside basis in his partnership interest is $250. River Avenue’s balance sheet (including FMV) is below. Mickey sells his interest to Roger for $500 cash + debt assumption. *Assume that River Avenue originally purchased the machinery for $120 (i.e., accumulated depreciation = $65), and that $120 of depreciation has been taken on the building since its acquisition five years ago* Assets FMV Book Tax Debt Book Tax Cash 240 240 240 Recourse 150 150 A/R 60 75 75 Inventory 150 90 90 Capital Machinery 100 55 55 Mickey 200 200 Building 500 200 200 Don 200 200 Stock 300 90 90 Derek 200 200 Goodwill 300 0 0 What is Roger’s initial outside basis and what is the balance in his capital accounts? If a section 754 election is made, what is the amount of the section 743(b) adjustment? How is the section 743(b) adjustment allocated among the partnership’s assets?
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter14: Partnerships And Limited Liability Entities
Section: Chapter Questions
Problem 20P
Related questions
Question
- Mickey, Don, and Derek are equal (1/3rd) partners in River Avenue, LLC. Mickey’s outside basis in his partnership interest is $250. River Avenue’s balance sheet (including FMV) is below. Mickey sells his interest to Roger for $500 cash + debt assumption. *Assume that River Avenue originally purchased the machinery for $120 (i.e., accumulated depreciation = $65), and that $120 of depreciation has been taken on the building since its acquisition five years ago*
|
Assets |
FMV |
Book |
Tax |
Debt |
Book |
Tax |
|
Cash |
240 |
240 |
240 |
Recourse |
150 |
150 |
|
A/R |
60 |
75 |
75 |
|
|
|
|
Inventory |
150 |
90 |
90 |
Capital |
|
|
|
Machinery |
100 |
55 |
55 |
Mickey |
200 |
200 |
|
Building |
500 |
200 |
200 |
Don |
200 |
200 |
|
Stock |
300 |
90 |
90 |
Derek |
200 |
200 |
|
Goodwill |
300 |
0 |
0 |
|
|
|
- What is Roger’s initial outside basis and what is the balance in his capital accounts?
- If a section 754 election is made, what is the amount of the section 743(b) adjustment?
- How is the section 743(b) adjustment allocated among the partnership’s assets?
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