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Assets (all real estate)
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$1,000,000
|
|
Liabilities (non-recourse)
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$1,300,000
|
|
A capital (40% P&L))
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$100,000
|
|
B Capital (30% P&L)
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$(100,000)
|
|
C Capital (30% P&L)
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$(300,000)
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C had deducted substantial losses from his investment in ABC LLC, reducing income from his other real estate investments. C decided that the partnership was a poor investment - it never made any money and never will. Therefore, he abandoned his interests in the LLC.
a. What are the tax consequences to C from abandoning his partnership interest?
b. C did not abandon his interest, but D made a $50,000 capital contribution and is to receive 40% of profits and losses, reducing C's interest to 18%. What are the tax consequences to C of D becoming a partner?