Question

can a partnership have unrealized receivables if it has no accounts receivable?

 

Absent any special election, what effect does a sale of partnership interest have on the partnership? 

Generally, a selling partner’s capital account carries over to the purchaser of the partnership interest. Under what circumstances will this not be the case? 

What distinguishes operating from liquidating distributions? 

Under what circumstances will a partners recognize a gain from an operating distribution? 

In general, what effect does an operating distribution have on the partnership? 

How does a partner determine his basis in distributed assets when the partnership distributes other property in addition to money and hot assets? 

In general, how do the disproportionate distribution rules ensure that partners recognize their share of partnership ordinary income? 

why would a new partner who pays more for a partnership interest than the selling partner’s 

outside basis want the partnership to elect a special basis adjustment? 

Are special basis adjustments mandatory? If so when?

Answer 1

.1. Can a partnership have unrealized receivables of it has no account receivable?

Ordinary income generating assets are normally called as hot assets which include unrealized receivables and appreciated inventory. Unrealized receivables are those receivables on the amount will be received in future when it is recognized. These are neither capital assets nor 1231 assets that would generate ordinary income if they are sold by partnership. The definition of unrealized receivable itself has a wider meaning to encompass assets other than receivables.

2. Generally, a selling partner’s capital account carries over to the purchaser of the partnership interest. Under what circumstances will this not be the case?

Amount of inherent loss as on partnership interest sale date will get reduced from buyer capital account where a selling partner contributed to the built in loss property to the partnership. The treatment will provides an assurance that only a partner who had contributed the built in loss property will reap the benefits from the inherent loss.

3. What distinguishes operating from liquidating distributions?

Liquidation distributions will discontinue the partner’s interest from partnership whereas operating distribution will made to those partner whose interest will continue after the distribution.

4. Under what circumstances will partners recognize a gain from an operating distribution?

Generally, partner does not recognize loss or gain from operating distributions. However when the money distributed by the partner is more than a partner’s basis in partnership interest then partner can recognize gain equal to such excess.