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 BookTaxDebtBookTaxCash240240240Recourse150150A/R6075 75 Inventory1509090Capital Machinery1005555Mickey200200Building500200200Don200200Stock30090 90Derek200200Goodwill30000 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?

1)i) Roger's outside basisCash paid =500Total debt =240+360 =600 Debt assumed =1/3 x 600…

Answered: Mickey, Don, and Derek are equal…

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter14: Choice Of Business Entity—operations And Distributions

Section: Chapter Questions

Problem 25P

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Mickey, Don, and Derek are equal (1/3^rd) 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?

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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