Question

.         According to the IRS, what items are included in “unrealized receivables” for these purposes?

2.         According to the IRS, what items are included in “inventory” for these purposes?

3.         If a partner sells an interest in a partnership in which his or her basis before the transaction is $100, the sales price is $150, the partnership has no unrealized receivables, and the partner’s share of the inventory of the partnership had a basis of $50 and a fair market value of $40, what dollar amounts of ordinary or capital gains or losses does the partner report? Assume that the partnership interest is a capital asset, there are no partnership liabilities, and that there are no at risk or passive activity issues.

Please answer each question in complete sentences, and cite name and number of the IRS publication or form/instruction where you found each answer, and the page number on which the answer is found. Use your own words in the answer – do not copy the IRS’ language

Answer 1

First Question Answer is as follow- Firstly we will understood whats in Unrealized receivables-

Unrealized receivables include any rights to payment not already included in income for the following items.

• Goods delivered or to be delivered to the extent the payment would be treated as received for property other than a capital asset.

• Services Supply or to be Supplied

Following Items included in unrealized Receivable-

Unrealized receivables include potential gain that would be ordinary income if the following partnership property were sold at its fair market value on the date of the payment.

• Mining property for which exploration expenses were deducted.

• Stock in a domestic international sales corporation (DISC).

• Certain farm land for which expenses for soil and water conservation or land clearing were deducted.

• Franchises, trademarks, or trade names.

• Oil, gas, or geothermal property for which intangible drilling and development costs were deducted.

• Stock of certain controlled foreign corporations.

• Market discount bonds and short-term obligations.

2 Questions Ans.

According to the IRS, Following items is included in “inventory” for the purposes of Unrealized receivables-

• Property that would properly be included in the partnership's inventory if on hand at the end of the tax year or that is held primarily for sale to customers in the normal course of business.

• Property that, if sold or exchanged by the partnership, wouldn't be a capital asset or section 1231 property (real or depreciable business property held more than 1 year). For example, accounts receivable acquired for services or from the sale of inventory and unrealized receivables are inventory items.

• Property held by the partnership that would be considered inventory if held by the partner selling the partnership interest or receiving the distribution.

Third Question Ans As follow-

If a partner sells an interest in a partnership in which his or her basis before the transaction is $100, the sales price is $150, the partnership has no unrealized receivables, and the partner’s share of the inventory of the partnership had a basis of $50 and a fair market value of $40,

this is as per section 751

150-100= 50$

sells an interest= 50$- Inventory Fare market Value is 40 So Capital Loss is 10$