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artner D is adamant that computers are more interesting than partnerships and decides he/she must bail out. To the delight of D a White Knight, Mr. F, agrees to buy his interest for the fair market value of $61,500. The balance sheet immediately before the sale of D's interest to F is as follows:

Balance Sheet
Inside 743(b) Basis
Basis (Partner E) FMV
Cash $ 50,000 $ - $ 50,000
Asset 1 7,500 - 1,000
Asset 2 12,000 - 2,000
Asset 3 20,000 531 30,000
Asset 4 40,000 797 60,000
Total assets $ 129,500 $ 1,328 $ 143,000

Liabilities $ 20,000 $ - $ 20,000
Capital -
A (10%) 10,950 - 12,300
E (10%) 10,950 1,328 12,300
C (30%) 32,850 - 36,900
D (50%) 54,750 - 61,500

Total liabilities and capital $ 129,500 $ 1,328 $ 143,000


1. Will there be a termination of the partnership upon sale of D's interest to the remaining partners?

2. Is there any gain or loss to be recognized by Partners A, E, C or F if there is a termination?

3. What are the bases of the assets deemed contributed to the new partnership?

4. What are the bases of the assets to the new partnership?

5. Are there any other partnership level tax consequences or issues as a result of the transferred interest?

 

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  • Category:- Accounting Basics
  • Reference No.:- M942941

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