Ch. 10 Flash Cards

Front 1

When do you recognize gain on a non liquidating partnership?

Back 1

If they receive distributions exceeding their basis

Front 2

Liquidating Distribution

Back 2

A single distribution or one of a planned series of distributions that terminates a partners interest in a partnership

Front 3

Section 731

Back 3

Partners who receive distributions recognize a gain if they receive money distributions that exceed their basis in the partnership

Front 4

Precontribution Gain Recognition

Back 4

Difference between FMV and adjusted basis of property contributed

Front 5

Amount of Precontribution Gain or Loss

Back 5

Equals the amount of the precontribution gain or loss remaining that would have been allocated to the contributing partner had the property instead been sold for its FMV on the distribution

Front 6

Partnerships Basis in Property

Back 6

The contributing partners basis in his or her partnership interest are both increased by any gain recognized or decreased by any loss recognized

Front 7

Gain Recognized on Section 737

Back 7

Lesser of the remaining precontribution net gain or the excess of the FMV of distributed property over the adjusted basis of the partnership interest. Any remaining precontribution gain is the net of all precontribution gains and losses for property contributed to the partnership seven years following

Front 8

Basis under Section 737

Back 8

Any Section 737 gain increases the partners basis in partnership interest

Front 9

Calculation for Postdistribution Basis in Partnership Interest

Back 9

Predistribution Basis in Partnership Interest
- Money Received
- Carryover basis in receivables
- Carryover basis in land
= Postdistribution basis in partnership interest

Front 10

Holding Period For Distributed Property

Back 10

Includes the partnerships holding period for such property.

Front 11

Distribution of Inventory in a Partnership

Back 11

The distributee partner recognizes ordinary income or loss on subsequent sale that occurs within 5 years of distribution.

Front 12

Section 751 Asset

Back 12

Unrealized Receivables and Inventory

Front 13

Unrealized Receivables

Back 13

Certain rights to payments to be received by a partnership to the extent they are not already included in income under the partnership's accounting method

Front 14

Example of Unrealized Receivable

Back 14

Potential Sect. 1245 and 1250 recapture on the partnerships depreciable property

Front 15

Inventory under Section. 751

Back 15

1. Items held for sale in the normal course of partnership business
2. Any other property that, if sold by the partnership, would not be considered a capital asset
3. Any other property held by the partnership that, if held by the selling or distributtee partner, would be property of the two types listed above

Front 16

What must inventory be in order for it to be a Section 751 asset?

Back 16

Substantially Appreciated

Front 17

IRC definition of Liquidating Distribution

Back 17

A distribution or a one of a series of distributions, that terminate a partners interest in the partnership. If its drastically reduced and not terminated its treated as a current distribution.

Front 18

Rule for Recognizing Gain on a Liquidating Distribution

Back 18

Same as current distribution. Gain is recognized if any money distributed exceeds the partners predistribution basis or interest.

Front 19

Rules for Recognizing Loss on a Liquidating Distribution

Back 19

Can recognize loss if
1. The liquidating distribution consists of money, unrealized receivables, and inventory but no property
2. The partners basis in the partnership interest exceeds the total basis of these distributed properties

Front 20

Basis in Assets Received

Back 20

Similar to rules in determining basis of asset received in a current distribution. Basis in urealized receivables and inventory is the same as the properties basis in the partnerships hands.

Front 21

What happens if the partnership distributes two or more assets other than unrealized receivables or inventory in the same distribution?

Back 21

Remaining basis in the partnership interest allocated among them based on their relative FMVs. Can lead to either a decrease or increase in total basis of assets.

Front 22

Holding Period in Distributed Assets

Back 22

The distributee partners holding period for any assets received in a liquidating distribution include the partnership's holding period for such property.

Front 23

Sale of a Partnership Interest

Back 23

Generally partners sale or exchange of partnership interest would generate capital gain or loss. Partner must recognize ordinary income or loss on the sale or exchange or interest to the extent the consideration received is attributable to the partners share of unrealized receivables and inventory items.

Front 24

IRC rules that cause a partnership to be terminated for Tax Purposes

Back 24

1. No part of the business, financial operation, or venture of the partnership continues to be carried on by any of its partners in a partnership.
2. Within 12 month period a sale or exchange of alteast 50% of the total interset in partnership capital and profit occurs.