15. The December 31, balance sheet of DBW, LLP, a service-providing partnership
ID: 2558421 • Letter: 1
Question
15. The December 31, balance sheet of DBW, LLP, a service-providing partnership is as follows. Adjusted Cash Receivables Capital assets Total Basis FMV $180,000 $180,000 -0- 60,000 90,000120,000 $270,000 $360,000 Dana, capital Brooke, capital Whitney, capital $ 90,000 $120,000 90,000 120,000 90,000120,000 $270,000 $360,000 equally in partnership capital, income, gain, loss, deduction, and credit. The partners share Capital is not a material income-producing factor to the partnership. On December 31, partner Dana (who is an active managing partner in the partnership) receives a distribution of cash in liquidation of her partnership interest under $ 736. Dana's outside basis for the partnership interest immediately before the distribution is $90,000. How much is Dana's gain or loss on the distribution and what is its character? $120,000Explanation / Answer
Dana’s gain is $10000 and it is a capital gain.
Explanation;
Items
Explanation
Dana’s share of the receivables ($60000 * 1/3) = $20000
Dana’s share of the unrealized receivables is a § 736(a) payment, hence it will be taxed as ordinary income.
Excess payment ($120000 – $20000) = $100000
As per information of the question, it is clear that Dona have basis of $90000. Hence Dona gain will be ($100000 – $90000) = $10000
Thus $10000 will be a capital gain and it is § 736(b) payment.
Items
Explanation
Dana’s share of the receivables ($60000 * 1/3) = $20000
Dana’s share of the unrealized receivables is a § 736(a) payment, hence it will be taxed as ordinary income.
Excess payment ($120000 – $20000) = $100000
As per information of the question, it is clear that Dona have basis of $90000. Hence Dona gain will be ($100000 – $90000) = $10000
Thus $10000 will be a capital gain and it is § 736(b) payment.
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