Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Lonnie Davis has been a general partner in the Highland Partnership for many years and is also a sole proprietor in a separate business. To

Lonnie Davis has been a general partner in the Highland Partnership for many years and is also a sole proprietor in a separate business. To spend more time focusing on his sole proprietorship, he plans to leave Highland and will receive a liquidating distribution of $50,000 in cash and land with a fair market value of $100,000 (tax basis of $120,000). Immediately before the distribution, Lonnies basis in his partnership interest is $350,000, which includes his $50,000 share of partnership debt. The Highland Partnership does not hold any hot assets.

  1. What is the amount and character of any gain or loss to Lonnie?

  2. What is Lonnies basis in the land?

  3. What is the amount and character of Lonnies gain or loss if he holds the land for 13 months as investment property and then sells it for $100,000?

  4. What is the amount and character of Lonnies gain or loss if he places the land into service in his sole proprietorship and then sells it 13 months later for $100,000?

  5. Do your answers to parts (c) and (d) above suggest a course of action that would help Lonnie to achieve a more favorable tax outcome?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions

Question

Define each of the following: Type I error, a. Type II error, B.

Answered: 1 week ago

Question

d. In what sports does the person consult?

Answered: 1 week ago