1. Alyssa’s outside basis in a partnership was $12,000. She received an operating distribution of both cash and property. The property distribution had a FMV of $9,000 and basis to the partnership of $6,000. The cash distribution was $8,000. After the distribution, what was Alyssa’s recognized gain, and what is her remaining outside basis in the partnership?

2. Riley is a 50% partner in the RF Partnership and has an outside basis of $56,000 at the end of the year prior to any distributions. On December 31 Riley receives a liquidating distribution of $6,000 cash and a parcel of land with a $140,000 FMV and a $38,000 basis to RF. What is the amount of Riley’s recognized gain and what is his basis in the land distributed to him?

3. Karen and Norma formed the general partnership K/N Partnership.

Karen contributed land with an adjusted basis of $70,000 and a FMV of $60,000. Karen also contributed services to the partnership for an equity position worth $35,000. She also contributed $40,000 in cash to the partnership. The land Karen contributed had a mortgage of $30,000, which was assumed by the partnership.

Norma contributed land to the partnership with an adjusted basis of $25,000 and a FMV of $125,000. The land Norman contributed had a mortgage of $20,000, which was assumed by the partnership.

Profits, losses and liabilities are shared equally.

a. Immediately after formation, what was the basis of Karen’s partnership interest?

b. What gain, if any, must Karen recognize due to the formation of K/M Partnership?

4. ACME Corporation has a deficit in accumulated E&P of ($130,000) at the beginning of the year. For the current year, ACME Corporation has current E&P of $30,000 not including any gain on property distributed to shareholders. At the end of the year, ACME Corporation distributes land worth $185,000 (basis $145,000) to its sole shareholder, Jennifer. The land distributed by the Corporation has a mortgage on it of $50,000 assumed by Jennifer. Jennifer has a basis of $75,000 in her stock of ACME Corporation.

a. How will Jennifer treat the distribution of property from ACME Corporation?

5. Tracy contributes the following assets and liabilities in the formation of Bluebird Corporation.

Tracy transferred property, basis of $480,000 with a FMV of $1,550,000, and cash of $100,000 for shares in Bluebird Corporation. Tracy’s property transferred to the corporation had a mortgage of $450,000 that the corporation assumed. Tracy also received 50 shares (worth $120,000) for expert services rendered to the corporation.

Tracy is part of a qualified Sec. 351 plan of incorporation.

a. What gains or losses must Tracy recognize because of the incorporation of Bluebird Corporation?

b. What is the basis of all the stock received by Tracy?

6. For the current year, Robin Corporation had the following activity:

Revenue from operations.................................................$200,000

Dividend income (less than 20% ownership)....................20,000

Capital gains..........................................................................10,000

Ordinary expenses..............................................................$90,000

Dividend paid by Robin Corporation to shareholders    ...25,000

Capital losses............................................................................15,000

Charitable contribution...........................................................30,000

What is Robin Corporation’s taxable income for the year?