Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Question
Chapter 15, Problem 15.15AQ
To determine
Tax basis of asset investment: for the capital investments, the accounting basis and the tax basis are computed differently. For tax purposes, a partnership must value the assets invested in it at the tax basis of the individual partner who invested the asset.
The tax valuation is different from the amount that is recognized under GAAP. A basic GAAP concept is to value asset transfers between separate reporting entities at their respective fair values.
the basis of H’s contribution for tax purpose and GAAP purpose
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Mike and Melissa form the equal MM Partnership. Mike contributes cash of $40,000 and land (fair market value of $100,000, adjusted basis of $136,000), and Melissa contributes the assets of her sole proprietorship (value of $140,000, adjusted basis of $115,000). What are the tax issues that should be considered by Mike, Melissa, and MM on the formation of the partnership? What are the tax consequences of these issues?
Continue with the facts presented in Problem 31. Mike purchased the land (value of $100,000; adjusted basis of $136,000) several years ago as an investment (capital) asset. Mike and MM LLC are trying to decide between two alternatives.
In Alternative 1, Mike will contribute the land to the LLC. MM will use the property as a § 1231 asset (a parking lot) and then sell it in six years at an estimated $100,000 price. (Disregard any potential improvements to the land.)
In Alternative 2, Mike will sell the land immediately to a third party and contribute to MM the $100,000…
Joseph contributed $22,000 in cash and equipment with a tax basis of $5,000 and a fair market value of $11,000 to Berry Hill Partnership in exchange for a partnership interest.
a. What is Joseph’s tax basis in his partnership interest?
b. What is Berry Hill’s basis in the equipment?
In each of the following problems, discuss fully the relevant tax codes and doctrines and or concepts and critically analyze each situation fully.
A, B, C, and D form a general partnership in which they each have an equal interest in capital and profits. All the partners and the partnership are cash method taxpayers. In exchange for their respective partnership interests, each partner transfers the following assets, all of which have been held long-term:
Partner Asset Adjusted Basis FMV
A Land $30,000 $70,000
Goodwill 0 22,000
Auto previously held
for personal use 10,000 8,000
B Equipment (all
sect. 1245 gain) 25,000 45,000
Installment note
from the sale of
land 20,000 25,000
Inventory 5,000…
Chapter 15 Solutions
Advanced Financial Accounting
Ch. 15 - Prob. 15.1QCh. 15 - Prob. 15.2QCh. 15 - Prob. 15.3QCh. 15 - Prob. 15.4QCh. 15 - Under what circumstances would a partner’s capital...Ch. 15 - Prob. 15.6QCh. 15 - Prob. 15.7QCh. 15 - Prob. 15.8QCh. 15 - Prob. 15.9QCh. 15 - Prob. 15.10Q
Ch. 15 - Prob. 15.11QCh. 15 - Prob. 15.12QCh. 15 - Prob. 15.13QCh. 15 - Prob. 15.14QCh. 15 - Prob. 15.15AQCh. 15 - Prob. 15.16BQCh. 15 - Prob. 15.1CCh. 15 - Prob. 15.2CCh. 15 - Prob. 15.3CCh. 15 - Prob. 15.1.1ECh. 15 - Prob. 15.1.2ECh. 15 - Prob. 15.1.3ECh. 15 - Prob. 15.1.4ECh. 15 - Multiple-Choice on Initial Investment [AICPA...Ch. 15 - Prob. 15.2ECh. 15 - Prob. 15.3ECh. 15 - Prob. 15.4ECh. 15 - Prob. 15.5ECh. 15 - Prob. 15.6ECh. 15 - Prob. 15.7ECh. 15 - Prob. 15.8.1ECh. 15 - Prob. 15.8.2ECh. 15 - Prob. 15.8.3ECh. 15 - Prob. 15.8.4ECh. 15 - Prob. 15.8.5ECh. 15 - Prob. 15.8.6ECh. 15 - Prob. 15.8.7ECh. 15 - Prob. 15.8.8ECh. 15 - Prob. 15.9ECh. 15 - Retirement of a Partner On January 1, 20X1, Eddy...Ch. 15 - Prob. 15.11PCh. 15 - Prob. 15.12PCh. 15 - Prob. 15.13PCh. 15 - Prob. 15.14PCh. 15 - Withdrawal of a Partner under Various Alternatives...Ch. 15 - Prob. 15.16.1PCh. 15 - Prob. 15.16.2PCh. 15 - Prob. 15.16.3PCh. 15 - Prob. 15.16.4PCh. 15 - Prob. 15.16.5PCh. 15 - Prob. 15.16.6PCh. 15 - Prob. 15.16.7PCh. 15 - Prob. 15.16.8PCh. 15 - Prob. 15.16.9PCh. 15 - Prob. 15.17PCh. 15 - Prob. 15.18PCh. 15 - Initial investments and Tax Bases [AICPA Adapted]...
Knowledge Booster
Similar questions
- This year, Darrel’s distributive share from Alcove Partnership includes $6,000 of interest income, $3,000 of dividend income, and $70,000 ordinary business income.a. Assume that Darrel materially participates in the partnership. How much of his distributive share from Alcove Partnership is potentially subject to the net investment income tax?arrow_forwardKenisha and Shawna form the equal KS LLC, with a cash contribution of $416,000 from Kenisha and a property contribution (adjusted basis of $436,800, fair market value of $416,000) from Shawna. If an amount is zero, enter "0".arrow_forwardOscar and Frank form an equal partnership, the O and F Partnership. Oscar contributes land with an adjusted basis of $45,000, subject to a mortgage of $100,000, in exchange for a partnership interest worth $250,000. Frank contributes cash of $100,000 and performs services for the partnership in exchange for a partnership interest worth $250,000. a. What is the amount of Oscar's recognized gain or loss (if any) as a result of the contribution to the partnership in exchange for the partnership interest? b. What is Oscar's basis in his partnership interest immediately after the contribution? c. What is the amount of Frank's recognized income or loss (if any) as a result of the receipt of the partnership interest in exchange for the cash and services? d. What is the partnership's basis in the land received from Oscar?arrow_forward
- Cosmo contributed land with a fair market value of $362,500 and a tax basis of $102,000 to the Y Mountain Partnership in exchange for a 30 percent profits and capital interest in the partnership. The land is secured by a $142,000 nonrecourse liability. Other than this nonrecourse liability, Y Mountain Partnership does not have any liability. b. What is Cosmo's tax basis in his partnership interest?arrow_forwardHagar is the owner of a sole proprietorship with net assets at book value of 100,000. Lot is also asole proprietor with net assets at book value of 200,000. the net assets of Hagar and Lot are to betaken by the partnership at their respective book value. Gideon is to contribute cash equal to 1/2 ofthe total agreed capitalization based on the contribution of Hagar and Lot. The amount of Gideon’scash contribution should be A. 100,000B. 150,000C. 200,000D. 300,000arrow_forward1.Where a partnership records a loss for an income year for tax purposes: (Choose the most correct option) a. It will be carried forward and allowed as a deduction from future income of the partnership. b. It is only transferred to the individual partner’s tax calculation as an allowable deduction for that partner's share if the individual partner has assessable income. c. It is transferred to the individual partner’s tax calculation as an allowable deduction and if the individual partner does not have assessable income sufficient to absorb the loss the individual partner can carry forward the loss or part of the loss to future years. d. It will be of no significance for tax purposes because it cannot be used by the partnership under tax legislation. 2. Which statement below best describes the entities that can accept donations from the public and provide donors with documentation to allow them to claim a tax deduction in respect of their…arrow_forward
- Juan Diego began the year with a tax basis in his partnership interest of $53,000. During the year, he was allocated $21,200 of partnership ordinary business income, $74,200 of §1231 losses, and $31,800 of short-term capital losses and received a cash distribution of $53,000. b. If any deductions or losses are limited, what are the carryover amounts, and what is their character?arrow_forward1. A partnership has four equal partners who share profits and losses in accordance with their respective interests. It has $400,000 in taxable income but doesn't distribute any cash to the partners. a. What amount of income will the partnership report on its tax return? None. There is no business income tax on a partnership. b. What amount of the partnership's taxable income will be subject to tax at the partnership level? c. Will each partner recognize taxable income from their interest in the partnership? If so, how much? d. If ABC was a corporation with four equal owners, how would this change your answers in parts (a)- (c)?arrow_forwardSEE ATTACHEDarrow_forward
- . Mark and Erik formed the M&E partnership as equal partners. The following assets were contributed: Asset adjusted basis fair market valve mark cash 60.000 60.000 Eric Land 50.000 70.000 The land was subject to a $10,000 mortgage that was assumed by the partnership. Calculate the initial tax basis for the partnership interests of Mark and Erikarrow_forwardThe ABCD Partnership owns the following assets on December 30 of the current year: View the assets. View the additional information. Requirement What are the tax consequences of the distribution to the partnership, Alana, and the other partners? Start by completing a Sec. 751 nonliquidating distribution analysis. (If an input field is not used in the table or the balance is 0, leave the field empty; do not enter a zero. Round to the nearest dollar. Use a minus sign or parentheses in the Difference column if Alana gave up her interest in a particular property.) Sec. 751 assets: Total Sec. 751 assets Non-Sec. 751 assets: Total non-Sec. 751 assets Beginning Partnership Amount Alana's Interest Before Distribution (1/4) Alana's Interest After Hypothetical Distribution Proportionate (1/5) Distribution (…) Actual Distribution Difference Assets Assets Cash Receivables Inventory Total $ Partnership's Basis $ Additional Information 100,000 $ 0 77,000 177,000 $ FMV 100,000 36,000 110,000 246,000…arrow_forwardCosmo contributed land with a fair market value of $362,500 and a tax basis of $102,000 to the Y Mountain Partnership in exchange for a 30 percent profits and capital interest in the partnership. The land is secured by a $142,000 nonrecourse liability. Other than this nonrecourse liability, Y Mountain Partnership does not have any liability. b. What is Cosmo's tax basis in his partnership interest? Please only typing answerarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
