The Spirit Partnership owns the following assets on October 1 of the current year: Assets Partnership’s Basis FMV Cash $30,000 $30,000 Receivables 0 16,000 Inventory 50,000 52,000 Supplies 6,000 6,500 Equipment* 9,000 10,500 Land 40,000 65,000 Total $135,000 $180,000 *Partnership has claimed $4,000 depreciation on the equipment a. Which items are considered as unrealized receivables of the partnership? b. Is the partnership’s inventory substantially appreciated? c. Assume the Spirit Partnership has no liabilities and that partner Betsy’s basis for her partnership interest is $33,750. On March 1 of the current year, Betsy receives a $20,000 current distribution in cash, which reduces her partnership interest from one-third to one-fourth. What are the tax results of the distribution (i.e., the amount and character of any gain, loss, or income recognized and Betsy’s basis in her partnership interest)?
The Spirit
Assets Partnership’s Basis FMV
Cash $30,000 $30,000
Receivables 0 16,000
Inventory 50,000 52,000
Supplies 6,000 6,500
Equipment* 9,000 10,500
Land 40,000 65,000
Total $135,000 $180,000
*Partnership has claimed $4,000
a. Which items are considered as unrealized receivables of the partnership?
b. Is the partnership’s inventory substantially appreciated?
c. Assume the Spirit Partnership has no liabilities and that partner Betsy’s basis for her partnership interest is $33,750. On March 1 of the current year, Betsy receives a $20,000 current distribution in cash, which reduces her partnership interest from one-third to one-fourth. What are the tax results of the distribution (i.e., the amount and character of any gain, loss, or income recognized and Betsy’s basis in her partnership interest)?
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