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 (include FMV) is below. What are the tax consequences to Mickey if he sells his interest to Roger for $500 cash + debt assumption? How much of the gain/loss is ordinary and how much is capital? *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

1. Amount Realized: Mickey sells his partnership interest for $500 in cash. In addition to the…

Answered: Mickey, Don, and Derek are equal…

Income Tax Fundamentals 2020

38th Edition

ISBN:9780357391129

Author:WHITTENBURG

Publisher:WHITTENBURG

Chapter10: Partnership Taxation

Section: Chapter Questions

Problem 12MCQ

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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 (include FMV) is below. What are the tax consequences to Mickey if he sells his interest to Roger for $500 cash + debt assumption? How much of the gain/loss is ordinary and how much is capital? *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

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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