Question 1

A
Basis FMV
Cash 30,000 30,000
Equipment 10,000 40,000
Stock 15,000 30,000
Building 15,000 100,000

Assets 70,000 200,000

Partner's Cap
Tony 55,000 100,000
Angela 15,000 100,000
Total Cap 70,000 200,000
Per the IRC there is no recognition of tax gain for the contribution of assets to a partnership. Thus, Tonay and Angela have reali
But for now, there are no immediate tax consequences for neither the partners nor the partnership. The partnershi

B This is the balance sheet before any transaction has taken place
Tax Book
Cash 30,000 30,000
Equipment 10,000 40,000
Stock 15,000 30,000
Building 15,000 100,000

Assets 70,000 200,000

Tony 55,000 100,000

Angela 15,000 100,000
Total Cap 70,000 200,000

First we record the sale of securities:

1. Compute tax and book gain
tax book
amt realized 40,000 40,000
basis 15,000 30,000
gain 25,000 10,000

2. Allocate book items to all P's

Tony 5,000
Angela 5,000

3.Allocate tax items to noncontributing p's first and the rest to the contributing p
Tony 20,000
Angela 5,000
 Now the balance sheet looks like this
Cash 70,000 70,000
Equipment 10,000 40,000
Building 15,000 100,000

Assets 95,000 210,000

Tony 75,000 105,000

Angela 20,000 105,000
Total Cap 95,000 210,000
The tax consequences are that per 704 tony till be allocated 20k in gains and angela will get 5k in tax gain. The partn

This is the balance sheet with the new equipment. I basically took out 50k in cash and added 50k in equipment.
Basis FMV
Cash 20,000 20,000
Equipment 10,000 40,000
New Equip 50,000 50,000
Building 15,000 100,000

Assets 95,000 210,000

Tony 75,000 105,000

Angela 20,000 105,000
Total Cap 95,000 210,000

C This is the balance sheet before the sale

Cash 20,000 20,000
Equipment 10,000 40,000
New Equip 50,000 50,000
Building 15,000 100,000

Assets 95,000 210,000

Tony 75,000 105,000

Angela 20,000 105,000
Total Cap 95,000 210,000
 Upon the sale of equipment, there will be no tax gain for angela or the partnership. All 30k in gain will go to tony

1. Compute tax and book gain

tax book
amt realized 40,000 40,000
basis 10,000 40,000
gain 30,000 -

2. Allocate book items to all P's

Tony -
Angela -

3.Allocate tax items to noncontributing p's first and the rest to the contributing p
Tony 30,000
Angela -

This is what the balance sheet looks like after the sale. Cash goes up by 40k and old equipment is gone from the ba
Tax FMV
Cash 60,000 60,000
New Equip 50,000 50,000
Building 15,000 100,000

Assets 125,000 210,000

Tony 105,000 105,000

Angela 20,000 105,000
Total Cap 125,000 210,000

D This is the balance sheet before the sale of the building

Tax FMV
Cash 60,000 60,000
New Equip 50,000 50,000
Building 15,000 100,000

Assets 125,000 210,000

Tony 105,000 105,000

Angela 20,000 105,000
Total Cap 125,000 210,000

First we calculate the allocations for the building sale

1. Compute tax and book gain

tax book
amt realized 70,000 70,000
basis 15,000 105,000
gain 55,000 (35,000)

2. Allocate book items to all P's

Tony (17,500)
Angela (17,500)

3.Allocate tax items to noncontributing p's first and the rest to the contributing p
Tony - There is no tax loss to allocate per the ceiling rule so angela gets all the tax gain
Angela 55,000

Now cap accounts look like this

Tony 105,000 87,500
Angela 75,000 87,500
total 180,000### 175,000

And the balance sheet looks like this

Cash 130,000 130,000

New Equip 50,000 50,000

Assets 180,000 180,000

But we need to make a remedial adjustment to the tax accounts of the partners
Tony 105,000 87,500
Angela 75,000 87,500
Angela 17,500
Tony (17,500)

Tony Total 87,500 87,500

Angela Total 92,500 87,500

Now we record the new building where cash goes down by 70k and the new building is recorded at 70k basis and fm
Cash 60,000 60,000
New Build 70,000 70,000
New Equip 50,000 50,000

Assets 180,000 180,000

 s, Tonay and Angela have realized gains which will be recognized later upon asset disposition.
he partnership. The partnership is a flow through and wont recognize any gain
will get 5k in tax gain. The partnership itself will never recognize gains because it's a flow through entity

d added 50k in equipment.

ll 30k in gain will go to tony

quipment is gone from the balance sheet

ela gets all the tax gain

is recorded at 70k basis and fmv

A
contribution 2,500 each to buy equipment
The cost depreciation expense (depex) will be split along the partners' interests in the partnership. In this case, 50/50
Book depreciation = tax depreciation / tax basis * book basis

tax depex 1,000

tax basis 5,000
book basis 5,000
Book depex 1,000

beg balance Tax book

Equip 5,000 5,000

T 2,500 2,500
U 2,500 2,500

tax depex (1,000)

book depex (1,000)

end balance
Equip 4,000 4,000

T 2,000 2,000
U 2,000 2,000

B
beg balance Tax book
Equip 5,000 5,000

T 2,500 2,500
U 2,500 2,500

tax depex (1,000)

book depex (1,000)

T Depex (750) (750)

U Depex (250) (250)

end balance
Equip 4,000 4,000

T 1,750 1,750
U 2,250 2,250
C
See Word Document
hip. In this case, 50/50
A.
There will be no tax consequences to the partnership per irc 701. Andy's basis will go from 70 to 10k as a result of the distributi

B.
There will be no tax consequences to the partnership. Since the partnership's basis in the land is 90k and beth's basis is 70k, be
will be zero. Beth will not face any tax consequences

C.
Per 701 there will be no tax consequences for the partnership. Colleen's putside basis will be reduced by the partnership's insi
She will take the car with a 40k basis and her outside basis will be reduced to 30k.

D. Ending balance sheet after distributions

Basis Fmv
Machinery 20,000 60,000
Assets 20,000 60,000

Andy 10,000 20,000

Colleen 30,000 40,000
Total 40,000 60,000
By virtue of her cap account going to zero, I assume Beth has received a liquidating distribution
 k as a result of the distribution

0k and beth's basis is 70k, beth will take the land with a 70k basis and her outside basis in the partnership

ed by the partnership's inside basis in the car, 40k.