Dispositions Of Partnership Interests And Partnership Distributions

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Dispositions of Partnership Interests and Partnership Distributions
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All Questions

Question 1

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True/False

Jason is a 25% partner in the JJM Partnership when he sells his entire interest to Lavelle for $76,000.At the time of the sale,Jason's basis in JJM is $87,000.JJM does not have any debt or hot assets.Jason's will recognize a gain of $11,000 on the sale of his partnership interest.

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Question 2

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True/False

A partner's debt relief from the sale of a partnership interest will decrease his outside basis.

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Question 3

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True/False

In the sale of a partnership interest,a selling partner will recognize ordinary income (rather than capital gain)when the partnership assets include cash and land held for 5 years as an investment.

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Question 4

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True/False

Hot assets include assets except cash,capital assets and §1231 assets.

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Question 5

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True/False

Federico is a 30% partner in the FRM Partnership when he sells his entire interest to Maria for $98,000.At the time of the sale,Federico's basis in FRM is $74,000.FRM does not have any debt.In addition,FRM's assets include accounts receivable with zero tax basis and $21,000 fair market value at the date of the sale.Federico will recognize ordinary income of $24,000 on the sale of his partnership interest.

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Question 6

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Under the entity concept,a partnership interest is an intangible asset similar to an ownership interest in a corporation.As such,a partnership interest is generally treated as a capital asset,the disposal of which results in capital gain or loss.

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Question 7

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If the partnership has hot assets at the time a partnership interest is sold,the selling partner must allocate a portion of the sale proceeds to these assets and recognize ordinary income (loss).

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Question 8

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The purpose of hot asset rules is to ensure that selling partners recognize all gain or loss on the sale of their partnership interests as capital.

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Question 9

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When determining a partner's gain on sale of his partnership interest,the selling partner must include her share of partnership debt in the amount realized.

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Question 10

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Operating distributions terminate a partner's interest in the partnership.

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Question 11

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A partner that receives cash in an operating distribution recognizes loss if the cash distributed is less than the partner's outside basis in the partnership immediately before the distribution.

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Question 12

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Cash distributions include decreases in a partner's share of partnership liabilities.

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Question 13

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In an operating distribution,when a partnership distributes property other than money with a basis that exceeds the partner's outside basis,the partner assigns a carryover basis to the distributed assets and recognizes a gain.

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Question 14

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A partner that receives cash in an operating distribution recognizes gain if the cash distributed exceeds the partner's outside basis in the partnership immediately before the distribution.

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Question 15

True/False

Barry has a basis in his partnership interest of $50,000 when the partnership distributes $60,000 to Barry.As a result of the distribution,Barry reduces his basis in the partnership interest to $0,has a $60,000 basis in the cash received,and he recognizes a gain of $10,000 on the distribution.

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Question 16

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The partnership making an operating distribution will recognize gain or loss only when the partner that receives the distribution recognizes gain or loss.

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Question 17

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A partner will recognize a loss from a liquidating distribution when the distribution includes only cash,unrealized receivables,and inventory and the partner's outside basis is less than the sum of the bases of the distributed assets.

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Question 18

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Ted is a 30% partner in the TDW Partnership with an outside basis of $20,000.TDW distributes $15,000 of cash in complete liquidation of Ted's interest.Ted recognizes a capital loss of $5,000 on the distribution.

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Question 19

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Catherine is a 30% partner in the ACW Partnership with an outside basis of $20,000.ACW distributes land with a basis of $12,000 and fair value of $18,000 to Catherine in complete liquidation of her interest.Catherine recognizes a capital loss of $2,000 on the distribution.

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Question 20

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A partner recognizes gain when he receives cash in excess of his outside basis in a liquidating distribution.

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