Basis FMV
Cash $24,000 $24,000
Accounts rec. $0 $18,000
Equipment $0 $6,000
Building $42,000 $45,000
Land $6,000 $9,000
$72,000 $102,000
Accounts payable $30,000 $30,000
A $14,000 $24,000
B $14,000 $24,000
C $14,000 $24,000
$72,000 $102,000
A,B, and C share profits and losses equally.
a. C Sold his interest to D and received $24,000 cash, and the partnership agreed to make the section 743 adjustments. What is C’s ordinary income__________ and capital gain_________?
b. If the partnership did not make the section 743 election, how would this affect the price C would receive for his interest? Explain.
c. C Left the partnership and received $8,000 in accounts receivable and $16,000 in cash. What is C’s recognized gain or loss on the liquidating distribution?
d. The ABC partnership decided to take the land and building out of the partnership so that it can be used in another venture. So the partnership distributed a one-third interest in the land and building and $4,000 to each of the three partners.
1. What is C’s recognized gain?
2. What is C’s basis in the land and building?
3. What is C’s basis in the partnership after the distribution?