Michelle pays $120,000 cash for Brittanys one-third interest in the Westlake Partnership. Just prior to the sale, Brittanys basis in Westlake is $96,000. Westlake reports the following balance sheet:

			Tax Basis		FMV
Assets:
Cash		$	96,000		$	96,000
Land			192,000			264,000
Totals		$	288,000		$	360,000
Liabilities and capital:
Capital	Amy		96,000
	Brittany		96,000
	Ben		96,000
Totals		$	288,000

(Do not round intermediate calculations. Leave no answer blank. Enter zero if applicable.)

8.

value: 1.00 points

Required information

a. What is the amount and character of Brittanys recognized gain or loss on the sale?

	$12,000 of ordinary income and $12,000 of capital gain
	$3,000 of ordinary income and $11,000 of capital gain
	$24,000 of capital loss
	$24,000 of capital gain
	Neither gain nor loss recognized

References

eBook & Resources

Multiple ChoiceLearning Objective: 21-01 Determine the tax consequences to the buyer and seller of the disposition of a partnership interest, including the amount and character of gain or loss recognized.

Difficulty: 2 MediumLearning Objective: 21-06 Explain the rationale for special basis adjustments, determine when they are necessary, and calculate the special basis adjustment for dispositions and distributions.

Check my work

9.

value: 1.00 points

Required information

b. What is Michelles basis in her partnership interest? What is Michelles inside basis?

References

eBook & Resources

ProblemLearning Objective: 21-01 Determine the tax consequences to the buyer and seller of the disposition of a partnership interest, including the amount and character of gain or loss recognized.

Difficulty: 2 MediumLearning Objective: 21-06 Explain the rationale for special basis adjustments, determine when they are necessary, and calculate the special basis adjustment for dispositions and distributions.

Check my work

10.

value: 1.00 points

Required information

c. If Westlake were to sell the land for $264,000 shortly after the sale of Brittanys partnership interest, how much gain or loss would the partnership recognize?

References

eBook & Resources

ProblemLearning Objective: 21-01 Determine the tax consequences to the buyer and seller of the disposition of a partnership interest, including the amount and character of gain or loss recognized.

Difficulty: 2 MediumLearning Objective: 21-06 Explain the rationale for special basis adjustments, determine when they are necessary, and calculate the special basis adjustment for dispositions and distributions.

Check my work

11.

value: 1.00 points

Required information

d. How much gain or loss would Michelle recognize?

References

eBook & Resources

ProblemLearning Objective: 21-01 Determine the tax consequences to the buyer and seller of the disposition of a partnership interest, including the amount and character of gain or loss recognized.

Difficulty: 2 MediumLearning Objective: 21-06 Explain the rationale for special basis adjustments, determine when they are necessary, and calculate the special basis adjustment for dispositions and distributions.

Check my work

12.

value: 1.00 points

Required information

e-1. Suppose Westlake has a 754 election in place. What is Michelles special basis adjustment? e-2. Suppose Westlake has a 754 election in place. How much gain or loss would Michelle recognize on a subsequent sale of the land in this situation?