2. The ABC cash method general partnership, which has made a s 754 had the follo

Question

2. The ABC cash method general partnership, which has made a s 754 had the following balance sheet at the time D purchased C's interest for $60,000 cash. None of the partnership's assets were contributed election, Liabilities and Partners' Capital A.B. F.M.V. 30,000 by a partner: Assets A.B. F.M.V. Liabilities: Capital: A $30,000 60,000 B 30,000 60,000 C 30,000 60,000 Accounts Receivable 0 $ 30,000 30,000 60,000 Land ( 1231 asset) 30,000 15,000 Building (S 1231 as- 30,000 105,000 Inventory set; no deprecia- tion recapture) $90,000 $210,000 $90,000 $210,000 Basis figures represent each partner's outside basis including their share of liabilities (a) What is D's personal inside basis in each of the assets? (b) What is D's personal inside basis in the assets if he paid $70,000 (rather than $60,000) for C's interest? (c) Same as (a), above (i.e., D buys C's interest for $60,000), except that C contributed the accounts receivable to the partnership at a time when the fair market value of the receivables was $30,000 and their basis was zero.

Explanation / Answer

A.

The D's interest Basis in the partnershio buisness is same as the A & B because A B & C are equal partners so as D had bought the C's Interest He will be equal partner in the business so the assets will be equal basis

B.

If D has bought the C's Interest for 70000 (actual amount is 60000) then both a and b should sacrifice 5000 from there capital accounts and the basis will be changed to not equal but D as superior partner as he has more value of capital in his capital Accounts

C.

In this case if D bought the Cs shares for 60000 but doesnt included the value of accounts receivable so he is not entitled to get the amount from accounts recevable but as he contributed the equal amount as of A & b then he must get the amount from diffrent assets where D gets a upper hand when compared to A & B

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