Calculate Phyllis' gain or loss realized During the current year, Phyllis Diaz sold her 20% interest in Carson Partnership for $46,000.She held the interest for several years.Prior to the sale, the partnership had the following on their books:Adj. BasisFair Market Value$ 70,000$ 70,0000$ 30,000$ 30,000$ 50,000$ 120,000$ 100,000*The partnership would recognize $6,000 of Sec. 1245 gain on this asset if it was sold.$ 20,000$ 20,000$ 60,000$ 46,000$ 140,000$ 184,000CashAccounts ReceivableMachinery*Real EstateLiabilitiesCapital-PhyllisCapital-Michael

Phyllis' adjusted basis in the partnership includes her share of the partnership's assets and liabilities. The partnership's assets and liabilities are as follows:Cash: $70,000Accounts Receivable: $30,000 (FMV, since there's no adjusted basis provided)Machinery: $30,000 (Adjusted Basis), $50,000 (FMV)Real Estate: $120,000 (Adjusted Basis), $100,000 (FMV)Liabilities: $20,000Phyllis' share (20%) of the adjusted basis and FMV of the partnership's assets, minus her share of the liabilities, will be her adjusted basis in the partnership.The partnership would recognize a Section 1245 gain of $6,000 on the machinery if sold.Phyllis' share of this gain is 20% of $6,000 i.e., $1,200.The remaining gain of $4,800 ($6,000 total gain - $1,200 Section 1245 gain) is typically treated as a capital gain.. This assumes that Phyllis' partnership interest is a capital asset to her.Therefore, Phyllis realized a total gain of $6,000on the sale of her partnership interest, consisting of $1,200 of ordinary income (Section 1245 gain) and $4,800 of capital gain.

Answered: *The partnership would recognize $6,000…

Business

Accounting

*The partnership would recognize $6,000 of Sec. 1245 gain on this asset if it was sold.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Accumulated Reserve on admission of a partner can be divided using? O a. New Profit Sharing Ratio O b. Gaining Ratio O c. Old Profit Sharing Ratio d. Sacrificing Ratio
Define Property Dividends.
Which of the following costs is a nonlease component for the lessee? taxes maintenance insurance
Define gaining ratio and why is it calculated.
Is dividend received always deducted when computing in Investment in Associate?
c) How much income did Theresa lose?
What is financial distress costs?
What is return on shareholder s quity(ROE)?
What is meant by an estate?
How does investing in income property works? Is it worth it?
Determine the components of postretirement benefit expense
Be able to calculate outside basis (or sometimes called Partner Basis) on contribution. “Basis given is Basis Received” How is cash treated? How is property treated, especially if there is property with a gain contributed? How is property that is encumbered with debt dealt with in outside basis calculations?