Grace, James, Helen, and Charles each own equal interest in GJHC Partnership, a calendar-year-end, cash-method entity. On January 1 of the current year, James basis in his partnership interest is $62,000. For the taxable year, the partnership generates $80,000 of ordinary income and $30,000 of dividend income. For the first 5 months of the year, GJHC generates $25,000 of ordinary income and no dividend income. On June 1, James sells his partnership interest to Robert for a cash payment of $70,000. The partnership has the following assets and no liabilities at the sale date:

Tax Basis FMV

Cash $ 27,000 $ 27,000

Land held for investment 80,000 100,000

Totals $ 107,000 $ 127,000

1. Assuming GJHCs operating agreement provides that the proration method will be used to allocate income or loss when partners interests change during the year, what is James basis in his partnership interest on June 1 just prior to the sale?

2. What is the amount and character of James recognized gain or loss on the sale?

c. If GJHC uses an interim closing of the books, what is the amount and character of James recognized gain or loss on the sale?

Coy and Matt are equal partners in the Matcoy Partnership. Each partner has a basis in his partnership interest of $28,000 at the end of the current year, prior to any distribution. On December 31, they each receive an operating distribution. Coy receives $10,000 cash. Matt receives $3,000 cash and a parcel of land with a $7,000 fair market value and a $4,000 basis to the partnership. Matcoy has no debt or hot assets.

1. What is Coys recognized gain or loss? What is the character of any gain or loss?

2. What is Coys ending basis in his partnership interest?

3. What is Matts recognized gain or loss? What is the character of any gain or loss?

4. What is Matts basis in the distributed property?

e. What is Matts ending basis in his partnership interest?