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13 Jul 2019

Liquidations:
Determine whether the following statements are True or False: TRUE FALSE

1. A liquidating cash distribution may reduce the recipient partner's basis below zero.
2. A liquidating distribution of appreciated inventory reduces the recipient partner's basis in his partnership interest to below zero.

3. If a partner has a basis of $15,000 in a partnership, and receives a non liquidating distribution of land with an adjusted basis of $16,000, but a FMV of $18,000, there will be a gain of $1,000.
4. A non liquidating distribution of only cash, may result in a deductible loss.
5. A liquidating distribution of only land, may result in a deductible loss.
6. In a nonliquidating distribution of property, the partner's basis must equal zero.
7. In a nonliquidating distribution, if there is sufficient basis to the partner, the property received will have the same basis to the partner as the property had to the partnership.
8. A partner recognizes a gain on a distribution only to the extent that cash received exceeds the partner's basis in the partnership.

9. Loss is recognized by the partner who receives a nonliquidating distribution of cash, when the amount of cash is less than his basis in the partnership interest before the distribution.
10. If a partner has a basis of $15,000 in a partnership, and receives a nonliquidating distribution of land with an adjusted basis of $16,000, but a FMV of $18,000, the land will have a basis of $15,000.

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Trinidad Tremblay
Trinidad TremblayLv2
16 Jul 2019

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Related questions

Please explain the difference

1. Under which of the following circumstances will a partnerrecognize a gain from a non-liquidating distribution?

a. A partner will never recognize a gain from a non-liquidatingdistribution.

b. A partner will recognize a gain from a non-liquidatingdistribution when the partnership distributes property other thanmoney with an inside basis greater than the partner's basis in thepartnership interest.

c. A partner will recognize a gain from a non-liquidatingdistribution when the partnership distributes money in an amountthat is less than the partner's basis in the partnershipinterest.

d. A partner will recognize a gain from a non-liquidatingdistribution when the partnership distributes money in an amountthat is greater than the partner's basis in the partnershipinterest.

2 Under which of the following circumstances will a partnerrecognize a loss from a non-liquidating distribution?

a. A partner will never recognize a loss from a non-liquidatingdistribution.

b. A partner will recognize a loss from a non-liquidatingdistribution when the partnership distributes property other thanmoney with an inside basis greater than the partner's basis in thepartnership interest.

c. A partner will recognize a loss from a non-liquidatingdistribution when the partnership distributes money in an amountthat is less than the partner's basis in the partnershipinterest.

d. A partner will recognize a loss from a non-liquidatingdistribution when the partnership distributes money in an amountthat is greater than the partner's basis in the partnershipinterest.

true and false questions

A redemption is always "essentially equivalent to a dividend"where a corporation's sole stockholder causes part of his shares tobe redeemed by the corporation.

When a partner receives a cash distribution from a partnershipthe partner always recognizes a gain on such distribution.

If a partner receives a non-liquidating cash distribution, thepartner will recognize a loss if the cash distributed is less thanthe partner's outside basis at the time of the distribution.

When a partner’s share of partnership liabilities and debts isreduced or relieved, such reduction or relief is treated as adeemed cash distribution which increases the partner’s outsidebasis.

A partner contributes property used in a trade or business to apartnership in return for a partnership interest. The partner heldthe property for 2 years prior to contribution. The partner thensells his partnership interest three weeks later. The contributingpartner will realize a short-term capital gain/loss on the sale ofhis partnership interest.

A distribution by a C-corporation that has Earnings and Profitsis always a dividend.

John is a 30% partner in the ABC Partnership with an outsidebasis of $42,000. ABC partnership distributes $15,000 of cash incomplete liquidation of John’s interest. John recognizes anordinary loss of $27,000 on the distribution

Like partnerships, an S corporation shareholder's stock basismust be adjusted annually.

A related party individual that receives a liquidatingdistribution from a corporation can recognize a loss

If a partnership makes a non-liquidating distribution oftangible property, and the inside basis of the property exceeds theoutside basis of the recipient-partner, the partner’s basis in thedistributed property is equal to his outside basis and he realizesgain on the difference between the inside basis and outsidebasis.

The RST partnership has three members, each owning a one-third interest in all items. One of the members is Randy. Randy has a tax basis in his RST interest of $50,000. In the following INDEPENDENT situations, Randy receives a distribution from RST. In each case determine the tax consequences to Randy, including whether he recognizes a gain or a loss, the basis of property that he receives, and the basis that remains with his partnership interest.

Remember that when a partnership is involved, the term “liquidating” means that the member’s interest is being liquidated NOT that the partnership itself is being liquidated.

RST distributes $40,000 of cash to Randy in a nonliquidating distribution.

RST distributes $40,000 of cash to Randy in a liquidating distribution.

RST distributes a capital asset with FMV of $220,000 and tax basis of $30,000 to Randy in a nonliquidating distribution.

RST distributes a capital asset with FMV of $220,000 and tax basis of $30,000 to Randy in a liquidating distribution.

RST distributes inventory with FMV of $220,000 and tax basis of $30,000 to Randy in a nonliquidating distribution.

RST distributes inventory with FMV of $220,000 and tax basis of $30,000 to Randy in a liquidating distribution.

RST distributes a capital asset with FMV of $220,000 and tax basis of $30,000 and inventory with FMV of $130,000 and a tax basis of $70,000 to Randy in a nonliquidating distribution.

RST distributes a capital asset with FMV of $220,000 and tax basis of $30,000 and inventory with a FMV of $130,000 and a tax basis of $70,000 to Randy in a liquidating distribution.

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