At the end of last year, June, a 30% partner in the four-person BJJM Partnership, had...

At the end of last year, June, a 30% partner in the four-person BJJM Partnership, had an outside basis of $75,000 in the partnership, including a $60,000 share of partnership debt. June’s share of the partnership’s § 1245 recapture potential was $40,000. All parties use the calendar year. Describe the income tax consequences to June in both of the following independent situations that take place in the current year.

a. On the first day of the tax year, June sells her partnership interest to Marilyn for $120,000 cash and the assumption by Marilyn of the appropriate share of partnership liabilities.

b. June dies after a lengthy illness on April 1 of the current year. June’s brother immediately takes June’s place in the partnership.

Expert Solution

ANSWER TO PART NO B:

In terms of Section 31 of the Indian Partnership Act, 1932, a new person can be introduced as a partner into a firm with the consent of all the existing partners subject to the execution of a fresh Partnership Deed. At the time of execution of fresh partnership deed presence of all the existing partners along with the new partner and witnesses is essential. All the partners are required to carry the original copy of their respective Permanent Account Number (PAN) as well as residence proofs.

The date when the fresh partnership deed is executed the previous partnership deed shall stand superseded. However, a person who is introduced as a partner into the firm does not become liable for any act of the firm done before he became a partner.

Cross-holding in new partners firm

Cross holding across firms do not have any material effect on the ability of a particular firm; each firm being a distinct legal entity; except from competing businesses prospective

ANSWER TO PART NO A :

The partnership interest recieved on the maturity is exempt from capital gain tax. rather a partnership firm is liable to pay tax on individual profit share. partners are exempted from doing so. No amount of profit or capital gain is taxed in the hands of June as per Income tax act 1961. But the most important condition is that Partnership firm has to pay the tax on individual partners profit and others income

ekkarill92 answered 1 year ago

AJ is a 30 percent partner in the Trane Partnership, a calendar year-end entity. On January...

AJ is a 30 percent partner in the Trane Partnership, a calendar year-end entity. On January 1, AJ has an outside basis in his interest in Trane of $77,500, which includes his share of the $53,600 of partnership liabilities. Trane generates $43,800 of income during the year and does not make any changes to its liabilities. On December 31, Trane makes a proportionate distribution of the following assets to AJ to terminate his partnership interest: (Leave no answer blank. Enter...

A partner withdraws from a partnership by selling their interest in the partnership to a person...

A partner withdraws from a partnership by selling their interest in the partnership to a person who is not currently associated with the partnership. As a result of this transaction, what will happen to the capital account balances of the other partners in the partnership? They will increase They will decrease They will remain the same They may increase, decrease, or remain the same What happens when an additional partner is admitted to a partnership by a contribution of assets...

Timothy is a 35% partner in the Total Partnership, a calendar-year-end entity. Timothy has an outside...

Timothy is a 35% partner in the Total Partnership, a calendar-year-end entity. Timothy has an outside basis in his interest in Total Partnership of $198,000, which includes his share of the $45,000 of partnership liabilities. On December 31, Total makes a proportionate distribution of the following assets to Timothy: BASIS FMV Cash $50,000 $50,000 Inventory $65,000 $75,000 Land $50,000 $65,000 Totals $165,000 $180,000 For an operating distribution, outline the tax consequences (amount and character of recognized gain or loss, basis...

Julian and Jenna carry on a partnership business and for the income year ended 30 June,...

Julian and Jenna carry on a partnership business and for the income year ended 30 June, the partnership net income was $38,000, as returned by their accountant. However, included in the deductions was a salary of $12,000 paid to Julian’s wife (who is not a business partner). The Commissioner disallows all but $2,000 of this amount. Required: a) What authority, if any, does the Commissioner have in disallowing the claim for salary? b) What course of action, if any, is...

1. Starbucks had a FCFE/share at the end of last year of $2.72. For this year,...

1. Starbucks had a FCFE/share at the end of last year of $2.72. For this year, growth is expected to be -9.89%, for years 2 and 3 growth is expected to be 9.95, and then 1.13 thereafter. If the correct cost of equity is 4.63, what is the current price? 2. Starbucks' FCFF (free cash flow to the firm) is $2.54/share. Using the Gordon Growth model with FCFF, find the value of the firm given constant growth of 1.98%, a...

Max is an auditor on the low end limited engagement for the year ended 30 June...

Max is an auditor on the low end limited engagement for the year ended 30 June 2012. Jordan has performed a number of tests in relation to accounts payable. Selected a number of suppliers' invoices and checked that the pricing and discount terms have been reviewed and authorized by the purchase manager. Three out of 20 invoices tested had not been authorized and incorrect discounts were recorded for these invoices. A follow-up of the three samples with deviations did not...

It determined at the end of the year you had 30% turnover (demand) of a specfic...

It determined at the end of the year you had 30% turnover (demand) of a specfic item and you would like 100% annually. How much do you reduce (forecast) inventory to achieve that 100% turnover?

Four people share an annuity which makes payments at the end of each year. Person A...

Four people share an annuity which makes payments at the end of each year. Person A gets the first ten payments of P. Person B gets the next 10 payments of 2P. Person C gets the next ten payments of 3P and person D gets the final ten payments of 4P. The present value of C's share is one-third the present value of A's share. a)What is the ratio of the present value of D's share to B's share? b)...

Last year a company had sales of $800,000, operating costs of 70%, and year-end assets of...

Last year a company had sales of $800,000, operating costs of 70%, and year-end assets of $1,500,000. The debt-to-total-assets ratio was 20%, the interest rate on the debt was 10.00%, and the tax rate was 21%. The new CFO wants to see how the ROE would have been affected if the firm had used a 30% debt ratio. Assume that sales and total assets would not be affected, and that the interest rate and tax rate would both remain constant....

For the year ended 30 June, Restaurants Pty Ltd had a tax loss of $70,000.

For the year ended 30 June, Restaurants Pty Ltd had a tax loss of $70,000. Its assessable income totalled $100,000 and its deductions totalled $170,000. Included in the assessable income was a partly franked dividend of $20,000 made up of $17,000 received and a franking credit of $3,000.What is Restaurants Pty Ltd carried forward tax loss?Nil as companies cannot carry forward losses$73,000$87,000$70,000$80,000

Question