On January 1, Jan, Kristi, and Shirley form a partnership. The contributions of the three

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 On January 1, Jan, Kristi, and Shirley form a partnership. The contributions of the three individuals are listed below. Jan received a 20% partnership interest, Kristi received a 70% partnership interest, and Shirley received a 10% partnership interest. They share the economic risk of loss from recourse liabilities according to their partnership interests.

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Kristi has claimed $16,000 of straight-line MACRS depreciation on the building. The land and building are subject to a $64,000 mortgage, of which $25,600 is allocable to the land and $38,400 is allocable to the building. The partnership assumes the mortgage.

Shirley is an attorney, and the services she contributes are the drawing-up of all partnership agreements.

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requirements

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Requirement a. What amount and character of gain, loss, or income must each partner recognize on the formation of the partnership? (If no gain, loss, or income is recognized by a partner, enter a "0" in the amount column and leave the character column blank.)

 
Amount of Gain,
 
Individual
Loss, or Income
Character
Jan
 
 
Kristi
 
 
Shirley
 
 
Requirement b. What is each partner's basis in her partnership interest?

 
Basis in
Individual
Partnership Interest
Jan
 
 

Kristi
 
 

Shirley
 
Requirement c & d. What is the partnership's basis in each of its assets? What is the partnership's initial book value of each asset? (Enter a "0" for any zero balances.)

 
Partnership's
Initial Book
Asset
Basis in Asset
Value of Asset
Accounts receivable
 
 
Land
 
 
Building
 
 
Organizational expenses
 
 
Requirement e. To raise some immediate cash after the formation, the partnership decides to sell the land and building to a third party and lease it back. The buyer pays $38,400 cash for the land and $57,600 cash for the building in addition to assuming the $64,000

mortgage. Assume the partnership claimed no additional depreciation on the building before the sale. What is each partner's distributive share of the gains, and what is the character of the gains?

Begin with the sale of the land. Select the partner(s) who will recognize a distributive share of the gain. Enter the amount and character of the gain to be recognized by each applicable partner. (If no gain is recognized by a partner, do not select the partner's name in the first column; then leave the remaining columns blank.)

 
Distributive share
 
Individual
of gain on land
Character
 
 
 
 
 
 
 
 
 
Now consider the sale of the building. Select the partner(s) who will recognize a distributive share of the gain. Enter the amount and character of the gain to be recognized by each applicable partner. (If no gain is recognized by a partner, do not select the partner's name in the first column; then leave the remaining columnsblank.)

 
Distributive share
 
Individual
of gain on building
Character
 
 
 
 
 
 
 
 
 
 
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