Question 1. [LO 1] Allison, Keesha, and Steven each own equal interests in KAS

1. [LO 1] Allison, Keesha, and Steven each own equal interests in KAS partnership, a calendar year-end, cash-method entity. On January 1 of the current year, Steven’s basis in his partnership interest is $27,000. During January and February, the partnership generates $30,000 of ordinary income and $4,500 of tax exempt income. On March 1, Steven sells his partnership interest to Juan for a cash payment of $45,000. The partnership has the following assets and no liabilities at the sale date:

Tax Basis FMV

Cash $ 30,000 $ 30,000

Land held for investment 30,000 60,000

Totals $ 60,000 $ 90,000

a. Assuming KAS’s operating agreement provides for an interim closing of the books when partners’ interests change during the year, what is Steven’s basis in his partnership interest on March 1 just prior to the sale?

b. What is the amount and character of Steven’s recognized gain or loss on the sale?

c. What is Juan’s basis in the partnership interest?

d. What is the partnership’s basis in the assets following the sale?

2. [LO 1] Grace, James, Helen, and Charles each own equal interests in GJHC partnership, a calendar year-end, cash-method entity. On January 1 of the current year, James’ basis in his partnership interest is $62,000. For the taxable year, the partnership generates $80,000 of ordinary income and $30,000 of dividend income. For the first 5 months of the year, GJHC generates $25,000 of ordinary income and no dividend income. On June 1, James sells his partnership interest to Robert for a cash payment of $70,000. The partnership has the following assets and no liabilities at the sale date:

Tax Basis FMV

Cash $ 27,000 $ 27,000

Land held for investment 80,000 100,000

Totals $ 107,000 $ 127,000

a. Assuming GJHC’s operating agreement provides that the proration method will be used to allocate income or loss when partners’ interests change during the year, what is James’ basis in his partnership interest on March 1 just prior to the sale?

b. What is the amount and character of James’ recognized gain or loss on the sale?

c. If GJHC uses an interim closing of the books, what is the amount and character of James’ recognized gain or loss on the sale?

3. [LO 1] At the end of last year, Lisa, a 35% partner in the five-person LAMEC partnership, has an outside basis of $60,000 including her $30,000 share of LAMEC debt. On January 1 of the current year, Lisa sells her partnership interest to MaryLynn for a cash payment of $45,000 and the assumption of her share of LAMEC’s debt.

a. What is the amount and character of Lisa’s recognized gain or loss on the sale?

b. If LAMEC has $100,000 of unrealized receivables as of the sale date, what is the amount and character of Lisa’s recognized gain or loss?

c. What is MaryLynn’s basis in the partnership interest?

4. [LO 1] Marco, Jaclyn, and Carrie formed Daxing partnership (a calendar year-end entity) by contributing cash 10 years ago. Each partner owns an equal interest in the partnership. Marco, Jaclyn, and Carrie each have an outside basis in his/her partnership interest of $104,000. On January 1 of the current year, Marco sells his partnership interest to Ryan for a cash payment of $137,000. The partnership has the following assets and no liabilities as of the sale date:

Tax Basis Fair Market Value

Cash $ 18,000 $ 18,000

Accounts receivable -0- 12,000

Inventory 69,000 81,000

Equipment 180,000 225,000

Stock investment 45,000 75,000

Totals $ 312,000 $ 411,000

Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.