Document1. Page 1 of 2
Multiple questions – November 1993
Items 55 and 56 are based on the following:
The adjusted basis of Jody's partnership interest was $50,000 immediately before Jody received a current
distribution of $20,000 cash and property with an adjusted basis to the partnership of $40,000 and a fair
market value of $35,000.
55. (CPAN93#55) What amount of taxable gain must Jody report as a result of this distribution?
$ 5,000
a. $0
b.
c. $10,000
d. $20,000
56. (CPAN93#56) What is Jody's basis in the distributed property?
$30,000
a. $0
b.
c. $35,000
d. $40,000
57. (CPAN93#57) The adjusted basis of Vance's partnership interest in Lex Associates was $180,000
immediately before receiving the following distribution in complete liquidation of Lex:
Basis to Lex
Fair market value
Cash
$100,000
$100,000
Real estate
70,000
96,000
What is Vance's basis in the real estate?
$83,000
a. $96,000
b.
c. $80,000
d. $70,000
58. (CPAN93#58) Cobb, Danver, and Evans each owned a one-third interest in the capital and profits of
their calendar-year partnership. On September 18, 2001, Cobb and Danver sold their partnership interests
to Frank, and immediately withdrew from all participation in the partnership. On March 15, 2002, Cobb
and Danver received full payment from Frank for the sale of their partnership interests. For tax purposes,
the partnership
a. Terminated on September 18, 2001.
b. Terminated on December 31, 2001.
c. Terminated on March 15, 2002.
d. Did not terminate.
59. (CPAN93#59) On December 31, 2002, after receipt of his share of partnership income, Clark sold his
interest in a limited partnership for $30,000 cash and relief of all liabilities. On that date, the adjusted
basis of Clark's partnership interest was $40,000, consisting of his capital account of $15,000 and his
share of the partnership liabilities of $25,000. The partnership has no unrealized receivables or
substantially appreciated inventory. What is Clark's gain or loss on the sale of his partnership interest?
a. Ordinary loss of $10,000.
b. Ordinary gain of $15,000.
c. Capital loss of $10,000.
d. Capital gain of $15,000.
60. (CPAN93#60) On June 30, 2003, Berk retired from his partnership. At that time, his capital account
was $50,000 and his share of the partnership's liabilities was $30,000. Berk's retirement payments
consisted of being relieved of his share of the partnership liabilities and receipt of cash payments of
$5,000 per month for 18 months, commencing July 1, 2003. Assuming Berk makes no election with
regard to the recognition of gain from the retirement payments, he should report income therefrom of:
2003
2004
a.
$13,333
$26,667
b.
20,000
20,000
c.
40,000
d.
40,000
Document1. Page 2 of 2
Multiple questions – November 1994
During 1990, Adams, a general contractor, Brinks, an architect, and Carson, an interior decorator, formed
the Dex Home Improvement General Partnership by contributing the assets below.
Adjusted
Fair Market
% of Partner Share in Capital,
Asset
Basis
Value
Profits, and Losses
Adams
Cash
$40,000
$40,000
50%
Brinks
Land
$ 12,000
$21,000
20%
Carson
Inventory
$24,000
$24,000
30%
The land was a capital asset to Brinks, subject to a $5,000 mortgage, which was assumed by the
partnership.
Required
For Items 61 and 62, determine and select the initial basis of the partner's interest in Dex.
61. (CPAN94#61) Brinks' initial basis in Dex is
a. $21,000
b. $12,000
c. $8,000
62. (CPAN94#62) Carson's initial basis in Dex is
a. $25,500 b. $24,000 c. $19,000
For Items 63 through 68, determine whether the statement is true (T) or false (F). During 1994, the Dex
Partnership breaks even but decides to make distributions to each partner.
63. (CPAN94#63) A nonliquidating cash distribution may reduce the recipient partner's basis in his
partnership interest below zero.
64. (CPAN94#64) A nonliquidating distribution of unappreciated inventory reduces the recipient
partner's basis in his partnership interest.
65. (CPAN94#65) In a liquidating distribution of property other than money, where the partnership's
basis of the distributed property exceeds the basis of the partner's interest, the partner's basis in the
distributed property is limited to his predistribution basis in the partnership interest.
66. (CPAN94#66) Gain is recognized by the partner who receives a nonliquidating distribution of
property, where the adjusted basis of the property exceeds his basis in the partnership interest before
the distribution.
67. (CPAN94#67) In a nonliquidating distribution of inventory, where the partnership has no unrealized
receivables or appreciated inventory, the basis of inventory that is distributed to a partner cannot
exceed the inventory's adjusted basis to the partnership.
68. (CPAN94#68) The partnership's nonliquidating distribution of encumbered property to a partner
who assumes the mortgage does not affect the other partners' bases in their partnership interests.