Accountancy Assignment
Part 1 - Tom and Betsy own and operate TBC, LLC. The company balance sheet shows assets as of today as follows:
|
|
Adjusted Basis
|
Fair Market Value
|
|
Cash
|
$30,000
|
$30,000
|
|
Accounts receivable
|
-0-
|
60,000
|
|
Equipment (Cost = $8,000)
|
-0-
|
10,000
|
|
Land and Buildings (Cost = $140,000)
|
120,000
|
200,000
|
Tom owns 60% of the profits, losses and capital; Valerie, 40%. Valerie sold her 40% interest to Marth for $120,000 cash.
a. What is the amount and character of Valerie's gain or loss? Is any of Valerie's gain 25% capital gain?
b. What is the amount and allocation of any adjustment if there is an election in effect under § 754?
c. What depreciation, if any, does Martha claim on the equipment that is 5-year MACRS property?
Part 2 - Sharon and Bob own and operate SB, LLC. The company balance sheet shows assets as of today as follows:
|
|
Adjusted Basis
|
Fair Market Value
|
|
Accounts receivable
|
60,000
|
60,000
|
|
Inventory
|
35,000
|
27,000
|
|
Equipment (Cost = $42,000)
|
25,000
|
18,000
|
|
Land and Buildings (no deprecation claimed)
|
100,000
|
220,000
|
Sharon owns 60% of the profits, losses and capital; Bob, 40%. Bob sold his 40% interest to Will for $130,000 cash.
a. What is the amount and character of gain or loss to Bob? Assume that Bob's outside basis is equal to his share of inside basis.
b. Under §751(d), are the accounts receivable "inventory"? The inventory? The equipment?
c. If the equipment was appreciated (rather than being worth less than basis), would it then be included in "inventory" under § 751(d)? Is it an unrealized receivable under §751(c)? Assume the equipment was worth $27,000.
Part 3 - Independent of "Part 2", Sharon and Bob own and operate SB, LLC. The company balance sheet shows assets as of today as follows:
|
|
Adjusted Basis
|
Fair Market Value
|
|
Accounts receivable
|
60,000
|
60,000
|
|
Inventory
|
35,000
|
37,000
|
|
Equipment (Cost = $42,000)
|
25,000
|
18,000
|
|
Land and Buildings (no deprecation claimed)
|
100,000
|
220,000
|
Sharon owns 60% of the profits, losses and capital; Bob, 40%. Bob sold his 40% interest to Howard for $130,000 cash.
a. What is the amount and character of gain or loss to Bob? Assume that Bob's outside basis is equal to his share of inside basis.
b. Assuming there is a § 754 election in place, what is the amount of the § 743(b) election and how is it allocated amongst the assets? Consult § 755 and the related regulations.
Part 4 - Independent of "Part 2" and "Part 3", Sharon and Bob own and operate SB, LLC. The company balance sheet shows assets as of today as follows:
|
|
Adjusted Basis
|
Fair Market Value
|
|
Accounts receivable
|
60,000
|
60,000
|
|
Inventory
|
35,000
|
27,000
|
|
Equipment (Cost = $42,000)
|
25,000
|
18,000
|
|
Goodwill
|
-0-
|
220,000
|
Sharon owns 60% of the profits, losses and capital; Bob, 40%. Sharon sold her 60% interest to Will for $195,000 cash.
a. What is the effect of this sale to the partners and the partnership?
b. How is the partnership ordinary (taxable) income of $36,000 for its calendar year 2010 allocated between the Sharon, Will, and Bob? Assume the sale occurred on October 1, 2010.