In: Finance
The PQRS Partnership owns the following assets on December 30 of the current? year:
Assets |
Partnership's Basis |
FMV |
Cash |
$20,000 |
$20,000 |
Receivables |
0 |
40,000 |
Inventory |
80,000 |
100,000 |
Total |
$100,000 |
$160,000 |
The partnership has no? liabilities, and each? partner's basis in his or her partnership interest is $25,000.On December 30 of the current? year,Paula receives a current distribution of inventory having a $10,000 FMV, which reduces her partnership interest from? one-fourth to? one-fifth.
Requirement
What are the tax consequences of the distribution to the? partnership,Paula?,and the other? partners?
Paula's |
Paula's |
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Beginning |
Interest Before |
Interest After |
Hypothetical |
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Partnership |
Distribution |
Distribution |
Proportionate |
Actual |
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Amount |
(1/4) |
(1/5) |
Distribution |
Distribution |
Difference |
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Sec. 751 assets: |
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Total Sec. 751 assets |
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Non-Sec. 751 assets: |
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Total non-Sec. 751 assets |