1 Honeymooner is a calendar year general partnership whose partners, Kramden and
ID: 2337482 • Letter: 1
Question
1
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
0) What is Alice’s tax basis in her partnership interest and if Honeymooner has an IRC Section 754 election in effect, what basis adjustments must Honeymooner make on the sale of the interest from Kramden to Alice and to what assets are such adjustments allocated?
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
ANSWER:
Here the given distributions were current distribution,
Distribution of assests Kramden Norton Cash $ 30000 Inventory $ 10000 Equipment $ 20000 Land $ 120000 Total 30000+10000= $ 40000 20000+120000= $ 140000 Capital Account $ 90000 $ 90000 Gain / Loss $ 50000 $ 80000Related Questions
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