Honeymooner is a calendar year general partnership whose partners, Kramden and N
ID: 2337469 • Letter: H
Question
Honeymooner is a calendar year general partnership whose partners, Kramden and Norton, share equally in the profits, losses and capital. Kramden and Norton founded the partnership several years ago and funded the partnership with cash contributions. As of December 31, 2003, the partnership had the following balance sheet:
Description
Tax Basis
Fair Market Value
Cash
$30,000
$30,000
Inventory
$10,000
$50,000
Equipment
$20,000
$70,000
Land Held for Investment
$120,000
$10,000
Totals
$180,000
$160,000
Capital
Kramden
$90,000
$80,000
Norton
$90,000
$80,000
Totals
$180,000
$160,000
The partnership is liquidated by the following distributions:
Description
Tax Basis
Fair Market Value
To Kramden: Cash
$30,000
$30,000
Inventory
$10,000
$50,000
Totals
$40,000
$80,000
To Norton Equipment:
$20,000
$70,000
Land
$120,000
$10,000
Totals
$140,000
$80,000
Assuming that such distributions were current distributions, what are Kramden and Norton’s tax basis in the property received?
Description
Tax Basis
Fair Market Value
Cash
$30,000
$30,000
Inventory
$10,000
$50,000
Equipment
$20,000
$70,000
Land Held for Investment
$120,000
$10,000
Totals
$180,000
$160,000
Capital
Kramden
$90,000
$80,000
Norton
$90,000
$80,000
Totals
$180,000
$160,000
Explanation / Answer
Assuming that such distributions were current distributions, what are Kramden and Norton’s tax basis in the property received?
Distribution of Assets Kramden Norton
Cash $30000
Inventory $10000
Equipment $20000
Land $120000
$40000 $140000
Capital Account $90000 $90000
Gain/(loss) ($50000) $80000
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