Ch 20 HW tax

What is the Tax Basis?

Contributed: 22,000

Equipment with Tax Basis + 5,000

Tax Basis = 27,000

FMV is not included

What is Berry Bill’s Basis in the Equipment?

Given which is 5,000 for basis on the equipment

Investment property worth $500,000

Purchased 3 years ago for $200,000

Exchange 85% profits and capital interest

Cloud peak owes suppliers $300,000

but no other liabilities

What is Lance’s tax basis in his LLC interest?

500,000

-200,000

=30,000 × 85% = 225,000 share of LLC liabilities

225,000 + 200,000 = 455,000

Tax basis uses historical carryover basis for partnerships FMV is capital and economic not Historical so they don’t use FMV.

What is Lance’s holding period in his interest?

Holding period: Period of three years of which Lance had been holding Investment property

What is Cloud Peak’s Basis in the contributed property?

Contributed Investment Property Worth: $500,000 (given)

What is cloud Peak’s contributed property?

(3 years ago Lance Purchased which is Lance contribution Investment property)

$200,000 Cash

What is Cloud Peak’s Holding Period in the Contributed Property?

Holding period: Period of three years of which Lance had been holding investment property for med.

Harry and Sally formed the Evergreen Partnership by contributing assets in exchange for 50% capital and profits interest in the Partnership:

Harry: Basis: FMV:

Cash: $30,000. $30,000

Land: $100,000. $120,000

Totals: $130,000 $150,000

How much gain or loss will harry and Sally recognize on the contribution?

Partner’s Don’t Generally recognize gain or loss when they contribute property to partnerships so Harry and Sally would recognize $0

What is Harry’s Tax Basis in his Partnership interest?

Tax Basis is $130,000

What is Sally’s tax basis in her partnership interest?

Tax Basis $200000

Sally: Equipment used in a business is 200000

What is Evergreen’s tax basis in it’s assets?

Total of Harry Basis is $130,000

+Total of Sally’s tax. +200,000

basis in P/S interest =330,000

Prepare tax basis balance sheet for the Evergreen Partnership showing the tax capital accounts for the Partners.

Evergreen Partnership

Tax Basis Balance Sheet

Assets: Tax Basis:

Cash: $30,000

Equip: 200,000

Land: 100,000

Totals 330,000

Capital:

Capital-Harry: 130,000

Capital-Sally: 200,000

Evergreen PartnershipTotals: 330,000

Capital WIC = Assets - Liabilities

Harry is Land + Cash (assets) = 130000

Sally has Equipment of 200,000

Cosmo contributed FMV of $400,000

Tax Basis of 90,000

Land of 120,000

To the Y Mountain P/S for an exchange 25% profits secured by Nonrecourse liability. No other Liability

What is Cosmo’s Tax Basis in his partnership interest?

TB = 90,000 × 25% profits = 225,000 Partnership interest

How much ordinary business income (loss) is allocated to Geogio for the year?

Total Amount Allocated to Georgio

Sales Revenue. $70,000

Cost of Goods Sold. (26,000)

Depreciation—MACRS (3000)

Employee Wages. (11000)

Guaranteed payments (3000)

Ordinary Business income 27,000 $5400

Ordinary Business income total amount: 27,000 and Allocated to Georgio: $5400

Mustafa’s tax basis in his partnership interest at the beginning of the year was $10,000. If his share of the partnership liabilities increased by $10,000 during the year and his shre of partnership income of the year is $3000.

What is his tax basis in his partnership interest at the end of the year?

Tax Basis: 23,000

Rank items in order in which they should be applied to adjust Carmine’s TB in Piccolo for the year:

Tax Exempt interest income and short-term capital gain

Cash Distributions

Nondeductible penalties

Ordinary Business loss

Ranking:

TB P/S interest: 30,000

P/S Liabilities Beg and end year: 4,000

Recourse liabilities: 4,000

Non-recourse Liability: 6,000

allocated: 40,000 (Ordinary business loss $40,000 - 30,000 = loss limited 30,000-10,000 loss suspended)

Passive income from other sources: 1000

Loss Limited by his TB: 10,000

Loss Limited by his TB: 10,000

Kamal Contributed $10,000 in Cash and a Capital Asset he had held for three years with FMV of 20000 and TB: $10000, 5% Capital and profits interest in Green Valley LLC (Tax Basis).

If Kamal sells LLC interest 12 months later for 30,000 when the tax basis in his partnership interest is still 20,000, how much gain does he report, and what is it’s character?

Long-term Capital Gain (LLC): 10,000

Investment in the business —> sell gain / loss capital

Long-term Capital Gain (LLC): 10,000

Connie recently provide legal services to winterhaven LLC and received a 5% interest in the LLC as compensation Winterhaven currently has $50,000 of A/P

Current FMV of winterhaven’s capital: $200,000

If connie receives a 5% Profits Interest only, How much income must she report, What is her tax basis in LLC Interest?

Income: $0

Tax Basis: $2,500= (50,000 × 5%)

Tree LLC was formed

Name

Ellie

Ditcher LLC

Perry Inc

What is the required taxable year-end for the LLC?

Oct. 31

Turtle Creek Partnership revenues, expenses, gains, losses distributions

Sales Revenue: $40,000

LT capital gain 2000

COGS 13000

Depreciation— MACRS (3000)

Amortization of Organizational Costs (1000)

Guaranteed Payments to Partners for general Management (10,000)

Cash Distributions to Partners (2000)

What is Ordinary Income (loss): 13,000

What is Ordinary Income (loss): 13,000