Maurice Tutor

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    Argosy University/ Phoniex University/
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    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 12 Aug 2017 My Price 12.00

Jerry’s ¼ interest

Linda pays $100,000 cash for Jerry’s ¼ interest in the JILL Partnership. The partnership has a Sec. 754 election effect. Just before the sale of Jerry’s interest, JILL’s balance sheet appears as follows:

 

 

 

 

 

 

Partnership’s Basis

 

 

FMV

 

 

Assets:

 

 

    

Cash

 

 

$75,000

 

 

$75,000

 

 

Land

 

 

$225,000

 

 

$325,000

 

 

Total

 

 

$300,000

 

 

$400,000

 

 

Partners' capital

 

 

    

Jerry

 

 

$75,000

 

 

$100,000

 

 

Instrument Corp

 

 

$75,000

 

 

$100,000

 

 

Logo Corp

 

 

$75,000

 

 

$100,000

 

 

Lighthouse Corp

 

 

$75,000

 

 

$100,000

 

 

Total

 

 

$300,000

 

 

$400,000

 

 

 

 

 

a. What is Linda’s total optional basis adjustment?

 

 

= $400,000 - $300,000 = $100,000

 

 

b. If JILL Partnership sells the land for its $325,000 FMV immediately after Linda purchases her interest, how much gain or loss will the partnership recognize?

 

 

= 325,000 – 225,000 = 100,000

 

 

= 100,000 – 25,000 = 75,000 Profit

 

 

c. How much gain will Linda report as a result of the sale?

 

 

= 325,000 – 225,000 = 100,000 Profit

Answers

Maurice Tutor
(5)
Status NEW Posted 12 Aug 2017 01:08 AM My Price 12.00

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