The XYZ partnership has the following balance sheet: and both have the same sharing rights. Basis FMV Land $66,000 $51,000 Accounts Receivable 0 15,000 Inventory 24,000 45,000 Collectibles 3,000 9,000 Total $93,000 $120,000 Liabilities $30,000 $30,000 Capital, X 21,000 30,000 Capital, Y 21,000 30,000 Capital, Z 21,000 30,000 Total $93,000 $120,000 a. If X sells her partnership interest to W for $30,000 cash, what is her gain or loss, and what is its character? b. What basis will W take in the partnership? c. If a Sec. 754 election is in place, what will the balance sheet look like after the transaction?
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
. The XYZ
Basis FMV
Land $66,000 $51,000
Inventory 24,000 45,000
Collectibles 3,000 9,000
Total $93,000 $120,000
Liabilities $30,000 $30,000
Capital, X 21,000 30,000
Capital, Y 21,000 30,000
Capital, Z 21,000 30,000
Total $93,000 $120,000
a. If X sells her partnership interest to W for $30,000 cash, what is her gain or loss, and what is its character?
b. What basis will W take in the partnership?
c. If a Sec. 754 election is in place, what will the balance sheet look like after the transaction?
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