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The operating expenses include a $1,800 trucking fine that one of its drivers incurred for reckless driving and speeding and meals expense of $6,000 (the meals were not provided by a restaurant). By the end of 2022, Reed has had a falling out with Carrie and Doug and has decided to leave the partnership. He has located a potential buyer for his partnership interest, Indie Ruff. Indie has agreed to purchase Reed's interest in Slicenhook for $730,000 in cash and the assumption of Reed's share of Slicenhook's debt. Carrie and Doug, however, are not certain that admitting Indie to the partnership is such a good idea. They want to consider having Slicenhook liquidate Reed's interest on January 1, 2023. As of January 1, 2023, Slicenhook has the following assets:

The operating expenses include a $1,800 trucking fine that one of its drivers incurred for reckless driving and speeding and meals expense of $6,000 (the meals were not provided by a restaurant). By the end of 2022, Reed has had a falling out with Carrie and Doug and has decided to leave the partnership. He has located a potential buyer for his partnership interest, Indie Ruff. Indie has agreed to purchase Reed's interest in Slicenhook for $730,000 in cash and the assumption of Reed's share of Slicenhook's debt. Carrie and Doug, however, are not certain that admitting Indie to the partnership is such a good idea. They want to consider having Slicenhook liquidate Reed's interest on January 1, 2023. As of January 1, 2023, Slicenhook has the following assets:

FINANCIAL ACCOUNTING
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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The operating expenses include a $1,800 trucking fine that one of its drivers incurred for reckless driving and speeding and meals expense of $6,000 (the meals were not provided by a restaurant). By the end of 2022, Reed has had a falling out with Carrie and Doug and has decided to leave the partnership. He has located a potential buyer for his partnership interest, Indie Ruff. Indie has agreed to purchase Reed's interest in Slicenhook for $730,000 in cash and the assumption of Reed's share of Slicenhook's debt. Carrie and Doug, however, are not certain that admitting Indie to the partnership is such a good idea. They want to consider having Slicenhook liquidate Reed's interest on January 1, 2023. As of January 1, 2023, Slicenhook has the following assets: Cash Investment-tax exempts Investment stock Equipment-net of depreciation Building-net of depreciation Land Total Cash Investment stock Carrie and Doug propose that Slicenhook distribute the following to Reed in complete liquidation of his partnership interest: Equipment-$200,000 cost, net of depreciation Tax Basis $ 876,800 15,000 45,000 333,000 1,146,000 460,000 $ 2,875,800 Total FMV $ 876,800 18,000 45,000 600,000 1,440,000 510,000 $ 3,489,800 Tax Basis $ 485,000 45,000 111,000 $ 641,000 FMV $ 485,000 45,000 200,000 $ 730,000
Transcribed Image Text:The operating expenses include a $1,800 trucking fine that one of its drivers incurred for reckless driving and speeding and meals expense of $6,000 (the meals were not provided by a restaurant). By the end of 2022, Reed has had a falling out with Carrie and Doug and has decided to leave the partnership. He has located a potential buyer for his partnership interest, Indie Ruff. Indie has agreed to purchase Reed's interest in Slicenhook for $730,000 in cash and the assumption of Reed's share of Slicenhook's debt. Carrie and Doug, however, are not certain that admitting Indie to the partnership is such a good idea. They want to consider having Slicenhook liquidate Reed's interest on January 1, 2023. As of January 1, 2023, Slicenhook has the following assets: Cash Investment-tax exempts Investment stock Equipment-net of depreciation Building-net of depreciation Land Total Cash Investment stock Carrie and Doug propose that Slicenhook distribute the following to Reed in complete liquidation of his partnership interest: Equipment-$200,000 cost, net of depreciation Tax Basis $ 876,800 15,000 45,000 333,000 1,146,000 460,000 $ 2,875,800 Total FMV $ 876,800 18,000 45,000 600,000 1,440,000 510,000 $ 3,489,800 Tax Basis $ 485,000 45,000 111,000 $ 641,000 FMV $ 485,000 45,000 200,000 $ 730,000
Slicenhook has not purchased or sold any equipment since its original purchase just after formation. h-1. If Reed sells his interest in Slicenhook to Indie Ruff, what is Indie's inside basis in Slicenhook? h-2. What effect would a §754 election have on Indie's inside basis? Complete this question by entering your answers in the tabs below. Req H1 Req H2 If Reed sells his interest in Slicenhook to Indie Ruff, what is Indie's inside basis in Slicenhook? Indie's inside basis Show Transcribed Text h-1. If Reed sells his interest in Slicenhook to Indie Ruff, what is Indie's inside basis in Slicenhook? h-2. What effect would a §754 election have on Indie's inside basis? Req H1 Complete this question by entering your answers in the tabs below. U Req H2 What effect would a §754 election have on Indie's inside basis? Special basis adjustment Increase
Transcribed Image Text:Slicenhook has not purchased or sold any equipment since its original purchase just after formation. h-1. If Reed sells his interest in Slicenhook to Indie Ruff, what is Indie's inside basis in Slicenhook? h-2. What effect would a §754 election have on Indie's inside basis? Complete this question by entering your answers in the tabs below. Req H1 Req H2 If Reed sells his interest in Slicenhook to Indie Ruff, what is Indie's inside basis in Slicenhook? Indie's inside basis Show Transcribed Text h-1. If Reed sells his interest in Slicenhook to Indie Ruff, what is Indie's inside basis in Slicenhook? h-2. What effect would a §754 election have on Indie's inside basis? Req H1 Complete this question by entering your answers in the tabs below. U Req H2 What effect would a §754 election have on Indie's inside basis? Special basis adjustment Increase
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