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The December 31, 2014, balance sheet of the BCD LLP reads as follows. The December 31, 2014, balance sheet of the BCD LLP reads as follows. Each partner shares in 1/3 of the partnership capital, income, gain, loss, deduction, and credit. Capital is not a material income-producing factor to the partnership. On December 31, 2014, general partner Christina receives a distribution of $140,000 cash in liquidation of her partnership interest under § 736. Nothing is stated in the partnership agreement about goodwill. Christina's outside basis for the partnership interest immediately before the distribution is $84,000. How much is Christina's recognized gain from the distribution and what is the character of the gain? Each partner shares in 1/3 of the partnership capital, income, gain, loss, deduction, and credit. Capital is not a material income-producing factor to the partnership. On December 31, 2014, general partner Christina receives a distribution of $140,000 cash in liquidation of her partnership interest under § 736. Nothing is stated in the partnership agreement about goodwill. Christina's outside basis for the partnership interest immediately before the distribution is $84,000. How much is Christina's recognized gain from the distribution and what is the character of the gain?

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Christina will recognize $47,000 of ordi...

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The JIH Partnership distributed the following assets to partner James in a proportionate liquidating distribution in which the partnership also liquidated: $25,000 cash, land parcel A (basis of $5,000, fair market value of $30,000) and land parcel B (basis of $5,000, fair market value of $15,000). James's basis in his partnership interest was $85,000 immediately before the distribution. James will allocate bases of $40,000 to parcel A and $20,000 to parcel B, and he will have no remaining basis in his partnership interest.

A) True
B) False

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Which of the following statements about the transfer of a partnership interest is not true?


A) The seller's adjusted basis for the partnership interest is increased by the seller's share of undistributed partnership income (or reduced by partnership loss) for the portion of the partnership's taxable year ending on the date of the sale.
B) The partnership taxable year generally does not close with respect to a partner who transfers a partnership interest at death; all amounts are allocated to the successor.
C) The amount realized on the sale of a partnership interest is the sum of any money and the fair market value of any property received for the interest, plus the selling partner's share of partnership liabilities under § 752.
D) With respect to a transfer of a partnership interest by gift, all partnership gain, loss, credit, etc., items are allocated between the donor and the donee.
E) All of the above are true statements.

F) A) and D)
G) B) and E)

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Match the following statements with the best match from the choices below. Note: Choice N may be used more than once -Step up


A) Includes the partner's share of partnership liabilities.
B) Could result from sale of a partnership interest for more than the partner's share of the inside basis of assets.
C) Liquidation payments from this type of partnership are always § 736(b) payments.
D) Could arise if a distribution results in loss to the distributee partner.
E) May be a § 736(a) payment.
F) May receive § 736(a) payments.
G) Probably treated as a general partner for § 736 purposes
H) Sale of more than 50% in less than 12 months.
I) Liquidation payments from this type of partnership may include § 736(a) payments.
J) A § 736(b) payment.
K) Adjustment designed to bring inside and outside bases into balance.
L) Partnership asset basis is at least $250,000 > FMV.
M) Would result if the partner contributes appreciated property to the partnership.
N) No correct match is provided.

O) A) and D)
P) E) and G)

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In a proportionate liquidating distribution, Sam receives a distribution of $30,000 cash, accounts receivable (basis of $0, fair market value of $50,000) , and land (basis of $20,000, fair market value of $50,000) . In addition, the partnership repays all liabilities, of which Sam's share was $40,000. Sam's basis in the entity immediately before the distribution was $120,000. As a result of the distribution, what is Sam's basis in the accounts receivable and land, and how much gain or loss does he recognize?


A) $0 basis in accounts receivable; $50,000 basis in land; $0 gain or loss.
B) $0 basis in accounts receivable; $90,000 basis in land; $0 gain or loss.
C) $50,000 basis in accounts receivable; $40,000 basis in land; $0 gain or loss.
D) $50,000 basis in accounts receivable; $50,000 basis in land; $50,000 gain.
E) $0 basis in accounts receivable; $70,000 basis in land; $30,000 loss.

F) B) and C)
G) B) and D)

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Match the following statements with the best match from the choices below. Note: Choice L may be used more than once -Optional adjustment election


A) Cash basis accounts receivable, for example.
B) Fair market value exceeds 120% of basis.
C) Inside basis of partnership property can be adjusted to reflect the purchase price paid.
D) Terminates the partner's interest in the partnership.
E) Ordinary income-producing items.
F) Cash, then inventory and unrealized receivables, then other assets.
G) Does not eliminate the partner's interest in the partnership.
H) Liquidation of the partner's interest in hot assets.
I) Changes the partner's or the partnership's ordinary income potential.
J) Any partnership assets other than cash, capital, or § 1231 assets.
K) Sometimes treated as an unrealized receivable.
L) No correct match provided.

M) H) and J)
N) A) and D)

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Nick sells his 25% interest in the LMNO Partnership to new partner Katrina for $57,500. The partnership's assets consist of cash ($100,000), land (basis of $90,000, fair market value of $70,000), and inventory (basis of $40,000, fair market value of $60,000). Nick's basis in his partnership interest was $57,500. On the sale, Nick will recognize ordinary income of $5,000 and a capital loss of $5,000.

A) True
B) False

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Alyce owns a 30% interest in a continuing partnership. The partnership distributes a $35,000 year-end cash payment to Alyce. In a proportionate nonliquidating distribution, the partnership also distributed property (basis of $20,000, fair market value of $30,000) to Alyce. Immediately before the distributions of cash and property, Alyce's basis in the partnership interest was $60,000. As a result of the distribution, Alyce recognizes:


A) No gain or loss.
B) Ordinary loss of $5,000.
C) Capital loss of $5,000.
D) Ordinary gain of $5,000.
E) Capital gain of $5,000.

F) A) and E)
G) B) and C)

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Generally, no gain is recognized on a proportionate liquidating or nonliquidating distribution of non-cash property even if the fair market value of property distributed exceeds the partner's basis in the partnership interest.

A) True
B) False

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Generally, a distribution of property does not result in gain to a partner on either a current or liquidating distribution. A situation where a gain may arise, however, is when a partner contributed appreciated property to the partnership and that property is distributed back to the contributing partner within seven years of the contribution.

A) True
B) False

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Taylor's basis in his partnership interest is $140,000, including his $60,000 share of partnership debt. Sandy buys Taylor's partnership interest for $100,000 cash and she assumes Taylor's $60,000 share of the partnership's debt. If the partnership owns no hot assets, Taylor will recognize a capital loss of $40,000.

A) True
B) False

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Catherine's basis was $50,000 in the CAR Partnership just before she received a proportionate nonliquidating distribution consisting of land held for investment with a basis to CAR of $40,000 (value of $60,000) , and inventory with a basis of $40,000 (value of $40,000) . After the distribution, Catherine's bases in the land and inventory are:


A) $40,000 (land) ; $40,000 (inventory) .
B) $40,000 (land) ; $10,000 (inventory) .
C) $10,000 (land) ; $40,000 (inventory) .
D) $25,000 (land) ; $25,000 (inventory) .
E) None of these statements is correct.

F) A) and E)
G) C) and D)

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In a liquidating distribution, a partnership must distribute all of its property to all of its partners.

A) True
B) False

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Which of the following statements, if any, about a multi-member LLC is false?


A) A multi-member LLC is usually taxed like a partnership.
B) "Members" of an LLC generally have limited personal liability for debts of the LLC, except for the managing member who has unlimited liability for LLC debts.
C) "Members" of an LLC can participate in management of the LLC unless the member agrees not to participate.
D) An LLC can specially allocate income items, as long as the substantial economic effect rules of § 704(b) are followed.
E) None of the above statements is false.

F) A) and C)
G) B) and D)

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A partnership is required to make a downward adjustment to the basis of its assets if a partnership interest is sold and if the total basis of partnership assets exceeds their value by more than $250,000, even if a § 754 election is not in effect.

A) True
B) False

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Nicky's basis in her partnership interest was $150,000, including her $40,000 share of partnership liabilities. The partnership decides to liquidate, and after repaying all liabilities, distributes all remaining assets proportionately to the partners. Nicky receives $30,000 cash and accounts receivable with a $50,000 basis and a $48,000 fair market value to the partnership. What gain or loss does Nicky recognize, and what is her basis in the accounts receivable?


A) $70,000 loss; $50,000 basis.
B) $30,000 loss; $50,000 basis.
C) $32,000 loss; $48,000 basis.
D) $72,000 loss; $48,000 basis.
E) $0 loss; $80,000 basis.

F) B) and D)
G) B) and C)

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Which of the following statements correctly reflects one of the rules regarding proportionate liquidating distributions?


A) Relief of liabilities is treated as a distribution of cash but only to the extent that the cash distribution does not exceed the partner's basis in the partnership interest.
B) A partner's basis in distributed unrealized receivables is the lesser of the partnership's basis in the receivables or their fair market value.
C) The basis of unrealized receivables cannot be stepped up to their fair market value unless the partner has adequate unabsorbed basis.
D) Assets are deemed distributed in the following order: cash, unrealized receivables and inventory and finally, capital assets.
E) The partner can recognize gain, but not loss, on a proportionate liquidating distribution.

F) A) and C)
G) None of the above

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Loss cannot be recognized on a distribution from a partnership unless cash, unrealized receivables and/or § 1231 assets are the only items distributed.

A) True
B) False

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Brittany, Jennifer, and Daniel are equal partners in the BJD Partnership. The partnership balance sheet reads as follows on December 31 of the current year. Brittany, Jennifer, and Daniel are equal partners in the BJD Partnership. The partnership balance sheet reads as follows on December 31 of the current year. Partner Daniel has an adjusted basis of $40,000 for his partnership interest. If Daniel sells his entire partnership interest to new partner Amber for $73,000 cash, how much can the partnership step-up the basis of Amber's share of partnership assets under §§ 754 and 743(b) ? A) $6,000 B) $17,000 C) $23,000 D) $33,000 E) None of the above Partner Daniel has an adjusted basis of $40,000 for his partnership interest. If Daniel sells his entire partnership interest to new partner Amber for $73,000 cash, how much can the partnership step-up the basis of Amber's share of partnership assets under §§ 754 and 743(b) ?


A) $6,000
B) $17,000
C) $23,000
D) $33,000
E) None of the above

F) B) and C)
G) C) and D)

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Which of the following distributions would never result in gain recognition to the recipient partner?


A) A distribution of cash that follows a contribution of appreciated property to the partnership.
B) A distribution of a slightly appreciated marketable security.
C) A distribution of property to a partner who, three years ago, contributed other property with a built-in gain.
D) A distribution to a second partner of property contributed by the first partner two years ago.
E) A proportionate distribution of inventory property.

F) C) and D)
G) A) and B)

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