Problem 1:
FACTS
Isabel purchases a 10% interest in Delta LP (a Limited Partnership) interest (taxed as a tax partnership) for $1 Million at the beginning of 2014.
Delta LP had $5 Million debt at the beginning of 2014 and $7 Million at year end 2014.
Delta LP reported $2 Million Taxable Income for 2014 and Isabel received a 10% distributive share of the income.
Delta LP did not make any distributions to partners in 2014.
Delta LP requested partners contribute additional funds for expansion needs. Total contributions for Delta LP partners is $5 Million and Delta contributed 10%.
QUESTION
Compute the year end 2014 tax basis Isabel has in Delta LP.
Problem 2:
FACTS
Marty, Nigel, and Advance Technology LP form a legal LLC (called Variant LLC) and default to tax partnership for tax purposes.
Marty contributes a patent with $2 Million FMV and $100,000 tax cost to her.
Nigel contributes other intellectual property (IP) with a $5 Million FMV and $800,000 tax cost to him. The IP has a $1 Million loan attached that also gets contributed to the tax partnership.
AdvanceTech LP contributes $2 Million cash to the tax partnership that has a $2 Million tax cost (as cash's tax cost always equals FMV).
Marty has a 25% interest, Niguel has a 50% interest, and AdvanceTech LP has a 25% interest in the tax partnership (interest here for all is defined as an interest in capital and profits).
Question
You are to compute a FMV and tax cost balance sheets for Variant LLC at formation date using the above information.
The balance sheet one requires a listing of assets, debt and capital accounts for each tax partner at FMV.
The balance sheet two requires a listing of assets, debt and capital account for each tax partner at tax cost.
Or, you can do one balance sheet and place the FMV accounts and Tax cost accounts in separate columns.
Problem 3:
FACTS
Once you compute the tax cost balance sheet in #3, you can solve this problem. As, you use the same fact situation from #2.
Question
Below, you can compute the adjsuted tax cost (basis) of Niguel's interest in the tax partnership.
Problem 4:
FACTS
Pecan Inc. (operating as a tax S corporation) is in its first year of operations. We are now at the end of the year.
Pecan Inc. has two shareholders:
The corporation received $1,000,000 total from the shareholders for their shares. Thus, the shareholders paid $1,000 cash per share.
Peacn Inc. has the following transactions for the year.
| Revenues |
$1,000,000 |
| Salary Expense |
$125,000 |
| Technology Lease Expense |
$350,000 |
| Consulting Fees Expense |
$75,000 |
| Net Short Term Capital Gain |
$100,000 |
| Charitable Contribution |
$25,000 |
| Total Cash Distributions to |
|
| Shareholders |
$80,000 |
Questions
Compute the total ordinary income for Peacn Inc.
Compute the separately stated items for Pecan Inc.
Compute Monica's share of the ordinary income
Compute Monica's share of the separately state items
Compute Monica's year end tax cost (basis) in her shares