Description
Complete the following. In these problems, apply
your knowledge of the rules and laws associated with tax reporting for
the partnership form of business ownership.
- Problem 49, on page 14-39.
- Problem 51, on page 14-39.
- Problem 55, on page 14-40.
- Problem 56, on page 14-41.
- Problem 61, on page 14-42.
- Problem 47, on page 15-36.
- Problem 50, on page 15-37.
- Problem 52, on page 15-37.
- Problem 53, on page 15-38.
- Problem 56, on page 15-39.
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Running Head: SOLVING PROBLEMS
Solving Problems
Student’s Name:
Course Title:
Date:
SOLVING PROBLEMS
1
Problem 49:
On June 1 of the current year, Patti contributes equipment with a $45,000 basis and a $35,000
FMV in exchange for a partnership interest. She purchased the equipment three years ago.
a. What is Patti’s basis in her partnership interest?
$45, 000
b. What is Patti’s holding period of her partnership interest?
Any capital asset held in a period of more than one year is considered a long-term capital
asset.
c. What is the basis of the equipment in the hands of the partnership?
It is considered to be the same as the basis in the hands of the partner.
d. What is the holding period of the equipment in the hands of the partnership?
It will be three years too.
e. How will the partnership depreciate the equipment in the year of contribution?
After the reception of the contributions, the depreciation schedule commences and it is
three years.
Problem 51:
Moe, Johnny, and Raymond form a partnership and contribute the following assets:
FMV
Basis
Partnership
Percentage
Moe’s inventory
$ 50,000
$10,000
33.3%
Johnny’s building
110,000
80,000
33.3
SOLVING PROBLEMS
Raymond’s cash
2
50,000
50,000
33.3
Johnny’s building has a mortgage of $60,000, which the partnership assumes.
a. Do any of the partners recognize any gain? If so, how much and why?
There is no partner who recognizes any gain.
b. What is the basis for each partner in his partnership interest?
Moe
Johnny
Raymond
10,000
80,000
50,000
Liabilities released
60,000
Share of liabilities
20,000
20,000
20,000
Ending Basis
$30, 000
$40, 000
$70,000
c. What is the basis to the partnership in each asset?
Cash
$50,000
Inventory
$10,000
Building
$80,000
Total
$130, 000
d. How would your answer change with respect to Johnny if the basis in the building were
$45,000?
SOLVING PROBLEMS
3
Beginning Basis
$45, 000
Release of Liability
$60, 000
Share of Liability
$20, 000
Ending Basis
$ 5,000
No gain or loss still. Jonny will recognize a gain if the starting basis went below zero.
Problem 55:
Bryan and Gayle are equal partners in BG Partnership. The partnership reports the following
items of income and expense:
Ordinary incom...