What is Phillip’s recognized gain or loss on the distribution? 2. What is the partnership’s recognized gain or loss? 3. After the distribution, what is Phillip’s basis in the receivables?
What is Phillip’s recognized gain or loss on the distribution? 2. What is the partnership’s recognized gain or loss? 3. After the distribution, what is Phillip’s basis in the receivables?
What is Phillip’s recognized gain or loss on the distribution? 2. What is the partnership’s recognized gain or loss? 3. After the distribution, what is Phillip’s basis in the receivables?
1. What is Phillip’s recognized gain or loss on the distribution?
2. What is the partnership’s recognized gain or loss?
3. After the distribution, what is Phillip’s basis in the receivables?
Transcribed Image Text:Phillip has a $63,000 outside basis in his partnership interest (cash-basis partnership). This year, the
partnership distributed the following to Phillip in a proportionate current distribution (land was
purchased by the partnership):
• Cash: $25,000
• Unrealized receivables: FMV = $16,000; inside basis = $0*
• Land: FMV = $90,000; inside basis = $80,000
*Note: even though a hot asset is distributed, this is not a disproportionate distribution because
the other partners were also distributed their pro-rata share of any hot assets (similar to the in-
class example where Dan and Ed each receive 50% of substantially appreciated inventory)
Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement 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, and drawings of a partner.
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