Exam (elaborations)
TAX 4001 - Chapter 21 Quiz (1)
TAX 4001 - Chapter 21 Quiz (1)
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TAX 4001 - Chapter 21 QuizAt the end of last year, Cynthia, a 20% partner in the five-person CYG partnership, has
an outside basis of $32,000 including her $18,000 share of CYG debt. On January 1 of
the current year, Cynthia sells her partnership interest to Roger for a cash payment of
$23,500 and the assumption of her share of CYG's debt. CYG has no hot assets. What
is the amount and character of Cynthia's recognized gain or loss on the sale? -
ANS-$9,500 capital gain.
$23,500 + $18,000 - $32,000 = $9,500
Daniel acquires a 30% interest in the PPZ Partnership from Paolo, an existing partner
for $46,500 of cash. The PPZ Partnership has borrowed $17,500 of recourse liabilities
as of the date Daniel bought the interest. What is Daniel's basis in his partnership
interest? - ANS-$51,750.
$46,500 + ($17,500 x 30%) = $51,750.
Kristen and Harrison are equal partners in the KH Partnership. The partners formed the
partnership 5 years ago by contributing cash. Prior to any distributions Harrison has a
basis in his partnership interest of $40,500. On December 31, KH makes a
proportionate operating distribution of $45,500 cash to Harrison. What is the amount
and character of Harrison's recognized gain or loss and what is his remaining basis in
KH? - ANS-$5,000 capital gain, $0 basis.
$45,500 - $40,500
Which of the following assets would not be classified as hot assets? - ANS-Cash.
Under which of the following circumstances will a partner recognize a gain from an
operating distribution? - ANS-A partner will recognize a gain from an operating
distribution when the partnership distributes money in an amount that is greater than the
partner's basis in the partnership interest.
In which type of distribution may a partner recognize a loss on the distribution? -
ANS-Liquidating distributions.
Which of the following statements is true regarding partnership operating distributions? -
ANS-Partners will never recognize a loss on an operating distribution.
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