Prentice Halls Federal Taxation 2015 Corporations Partnerships Estates and Trusts 28Th Edition Pope Test Bank Full Chapter PDF

Prentice Halls Federal Taxation 2015
Corporations Partnerships Estates and

Trusts 28th Edition Pope Test Bank
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Prentice Hall's Federal Taxation 2015 Corporations, 28e (Pope)
Chapter C10 Special Partnership Issues
1) A partnership cannot recognize a gain or loss on a current distribution.

Answer: FALSE
Page Ref.: C:10-2
Objective: 1
2) If a partnership asset with a deferred precontribution gain is distributed within seven years of
acquisition in a nonliquidating distribution to a partner who did not contribute the asset, the
precontribution gain must be recognized by the contributing partner.
Answer: TRUE
Page Ref.: C:10-2
Objective: 1
3) In a current distribution, the partner's basis in the partnership interest is reduced by the amount of
money received and by the partnership's bases in the distributed property.
Answer: TRUE
Page Ref.: C:10-4
Objective: 1
4) A partner's holding period for property distributed as a current distribution begins on the date of
distribution.
Answer: FALSE
Page Ref.: C:10-7
Objective: 1
5) Under Sec. 751, unrealized receivables include potential Section 1245 or 1250 recapture on the
partnership's depreciable property.
Answer: TRUE
Page Ref.: C:10-8
Objective: 2
6) For Sec. 751 purposes, "substantially appreciated inventory" means property held for sale to customers
whose market value exceeds its adjusted basis.
Answer: FALSE
Page Ref.: C:10-12
Objective: 2
7) A partner can recognize gain, but not loss, on a liquidating distribution.

Answer: FALSE
Page Ref.: C:10-14
Objective: 3
8) A partner's holding period for a partnership interest is never considered when determining the holding
period for property distributed in a liquidating distribution.
Answer: TRUE
Page Ref.: C:10-16 and C:10-17
Objective: 3
1
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9) The sale of a partnership interest always results in capital gain or loss rather than ordinary income.
Answer: FALSE
Page Ref.: C:10-16 through C:10-18
Objective: 3
10) When a retiring partner receives payments that exceed the value of that partner's partnership
property, the excess payment is a guaranteed payment.
Answer: FALSE
Page Ref.: C:10-19
Objective: 4
11) Under the check-the-box rules, an LLC with more than one member is taxed as a partnership unless it
elects to be taxed as a corporation.
Answer: TRUE
Page Ref.: C:10-21
Objective: 4
12) A limited liability company is a form of business entity that combines the legal benefits of the
corporate form with the tax benefits of the partnership form.
Answer: TRUE
Page Ref.: C:10-30
Objective: 6
13) A new partner, Gary, contributes cash and assumes a share of partnership liabilities. Diane's capital,
profits, and loss interest in the partnership is reduced by 5% due to the admission of Gary. The Sec. 751
rules do not apply. Partnership liabilities at the time Gary is admitted are $200,000, and all of the
liabilities are recourse debts for which the partners share the economic risk of loss in the same way they
share partnership profits. Diane's basis in the partnership interest prior to Gary's admission is $5,000. Due
to the admission of Gary, partner Diane has
A) no recognized gain or loss and a partnership interest basis of $10,000.
B) no recognized gain or loss.
C) a recognized gain of $5,000 and a partnership interest basis of zero.
D) a recognized gain of $5,000 and a partnership interest basis of $5,000.
Answer: C
Explanation: C) Diane's reduction in partnership liabilities by the addition of Gary is $10,000 (0.05 ×
$200,000 = $10,000). Because the $10,000 reduction is deemed cash distributed, Diane has a gain equal to
the excess of the cash deemed distributed over her basis:
Cash deemed distributed $10,000

Minus: original basis ( 5,000)
Gain recognized $ 5,000
The new basis of Diane's partnership interest is zero.

Page Ref.: C:10-2
Objective: 1
2
14) If a distribution occurs within ________ years of the contribution date, in a nonliquidating distribution
that does not qualify for Sec. 751 treatment, the distribution event may trigger a precontribution gain or
loss.
A) three
B) five
C) seven
D) unlimited
Answer: C
Page Ref.: C:10-2
Objective: 1
15) Mirabelle contributed land with a $5,000 basis and a $9,000 FMV to MS Partnership four years ago.
This year the land is distributed to Sergio, another partner in the partnership. At the time of distribution,
the land had a $12,000 FMV. How much gain should Mirabelle and Sergio recognize?
A)
Mirabelle Sergio
0 0
B)
Mirabelle Sergio
$4,000 0
C)
Mirabelle Sergio
$4,000 $3,000
D)
Mirabelle Sergio
$5,500 $1,500
Answer: B
Page Ref.: C:10-3; Example C:10-2
Objective: 1
16) Mirabelle contributed land with a $5,000 basis and a $9,000 FMV to MS Partnership four years ago.
This year the land is distributed to Sergio, another partner in the partnership. At the time of distribution,
the land had a $12,000 FMV. What is the impact of the distribution on Mirabelle's partnership basis?
A) 0
B) $4,000 increase
C) $4,000 decrease
D) $7,000 increase
Answer: B
Objective: 1
3
17) Susan contributed land with a basis of $6,000 and an FMV of $10,000 to the SH Partnership two years
ago to acquire her partnership interest. This year, the land is distributed to Harry when its FMV is
$11,000. No other distributions have been made since Susan became a partner. When the land is
distributed, the partnership's basis in the land immediately before distribution is increased by
A) $0.
B) $1,000.
C) $4,000.
D) $5,000.
Answer: C
Objective: 1
18) Helmut contributed land with a basis of $5,000 and an FMV of $10,000 to the HG Partnership five
years ago to acquire a 50% partnership interest. This year the land is distributed to another partner, Gail,
when its FMV is $11,000. No other distributions have been made since Helmut became a partner. When
the land is distributed to Gail, Helmut recognizes a gain of
A) $0.
B) $2,500.
C) $3,000.
D) $5,000.
Answer: D
Objective: 1
19) Becky has a $24,000 basis in her partnership interest. She receives a current distribution of $4,000 cash,
unrealized receivables with a basis of $12,000 and an FMV of $16,000, and land held as an investment
with a basis of $3,000 and an FMV of $8,000. The partners' relative interests in the Sec. 751 assets do not
change as a result of the current distribution. The basis of her partnership interest following the
distribution is
A) $5,000.
B) $1,000.
C) $0.
D) ($4,000).
Answer: A
Explanation: A)
Predistribution basis $24,000
Minus: cash ( 4,000)
unrealized receivables (12,000)
land ( 3,000)
Postdistribution basis $ 5,000
Objective: 1
4
20) John has a basis in his partnership interest of $30,000. He receives a current distribution of $6,000 cash,
unrealized receivables (FMV $11,000, basis $10,000), inventory (FMV $8,000, basis $4,000), and investment
land (FMV $7,000, basis $6,000). The partners' relative interest in the Sec. 751 assets do not change as a
result of the current distribution. His basis in the land is
A) $5,000.
B) $6,000.
C) $7,000.
D) $10,000.
Answer: B
Explanation: B)
unrealized receivables ( 10,000)
inventory ( 4,000)
Basis available for land $10,000
Carryover basis of land $ 6,000
Page Ref.: C:10-4
Objective: 1
21) Danielle has a basis in her partnership interest of $12,000. She receives a current distribution of $8,000
cash and equipment with a basis of $7,000. There is no potential gain under Sec. 737. What is her basis in
the equipment?
A) $0
B) $4,000
C) $7,000
D) none of the above
Answer: B
Page Ref.: C:10-4
Objective: 1
22) Identify which of the following statements is true.

A) If a partnership asset with a deferred precontribution gain is distributed in a nonliquidating
distribution to the partner who contributed the asset, the precontribution gain must be recognized by the
partner.
B) The partner's basis in the partnership interest is normally reduced by the FMV of property distributed
in a nonliquidating distribution.
C) When a current distribution from a partnership reduces the basis of the partnership interest to zero,
the partner's interest in the partnership is terminated.
D) All of the above are false.
Answer: D
Objective: 1
5
23) Tenika has a $10,000 basis in her interest in the TF Partnership and no remaining precontribution gain
immediately before receiving a current distribution that consisted of $4,000 in money, plastic tubes held
in inventory with a $3,000 basis to the partnership and an FMV of $3,375, and drip irrigation pipe held as
inventory with a $6,000 basis to the partnership and an FMV of $5,000. What is the basis in Tenika's hands
of the distributed property?
A) $10,000
B) $6,000
C) $9,000
D) $10,125
Answer: B
Explanation: B)
Predistribution basis in partnership interest $10,000
Minus: money received ( 4,000)
Plus: Sec. 737 gain 0
Amount to be allocated $ 6,000
Objective: 1
6
24) Tenika has a $10,000 basis in her interest in the TF Partnership and no remaining precontribution gain
immediately before receiving a current distribution that consisted of $4,000 in money, plastic tubes held
in inventory with a $3,000 basis to the partnership and an FMV of $3,375, and drip irrigation pipe held as
inventory with a $6,000 basis to the partnership and an FMV of $5,000. What is Tenika's basis for the
plastic tubes and drip irrigation pipe?
A)
Plastic Tubes Drip Pipe
3,375 $5,000
B)
$3,000 $6,000
C)
$3,000 $5,000
D)
$2,250 $3,750
Answer: D
Explanation: D)
Plastic Tube Drip Pipe Total
FMV of Asset $3,375 $5,000 $8,375
- Partner basis 3,000 6,000 9,000
Difference 375 ( 1,000) ( 625)
Step 1: Basis $3,000 $6,000 $9,000
- Toby basis 6,000
Increase to allocate $3,000
Step 2: Basis $3,000 $6,000 $9,000
Allocate decline in value (1,000) ( 1,000)
$3,000 $5,000 $8,000
Step 3: Allocate ( 750)* ( 1,250)** ( 2,000)
$2,250 $3,750 $6,000
*$3,000 ÷ ($3,000 + $5,000) × 2,000 = 750

**$5,000 ÷ ($3,000 + $5,000) × 2,000 = 1,250
Objective: 1
7
25) The total bases of all distributed property in the partner's hands following a nonliquidating
distribution is limited to
A) the partner's predistribution basis in his partnership interest.
B) the FMV of the property distributed.
C) the partnership's bases in the distributed property.
D) the predistribution FMV of the partner's partnership interest.
Answer: A
Page Ref.: C:10-6
Objective: 1
26) Carlos has a basis in his partnership interest of $30,000. He receives a current distribution of $6,000
cash, unrealized receivables (FMV $11,000, basis $10,000), inventory (FMV $8,000, basis $4,000), land held
as an investment (FMV $7,000, basis, $6,000), and building (FMV $21,000, basis $9,000). The partners'
relative interests in the Sec. 751 assets do not change as a result of the current distribution. Carlos's basis
in the building is
A) $2,500.
B) $6,000.
C) $7,500.
D) $9,000.
Answer: B
Explanation: B)
Basis $30,000
$24,000
Minus: unrealized receivables ( 10,000)
inventory ( 4,000)
Basis to be allocated to land and building $10,000
[$9,000/($9,000 + $6,000)] × $10,000 = $6,000

Page Ref.: C:10-6
Objective: 1
8
27) Bart has a partnership interest with a $32,000 basis. He receives a current distribution of $6,000 cash,
unrealized receivables (FMV $9,000, basis $10,000), inventory (FMV $8,000, basis $4,000), investment land
(FMV $7,000, basis $4,000), and building (FMV $20,000, basis $8,000). No depreciation recapture applies
with respect to the building. The partners' relative interests in the Sec. 751 assets do not change as a result
of the current distribution. Bart's basis in the building is
A) $3,000.
B) $4,000.
C) $6,000.
D) $8,000.
Answer: D
Explanation: D)
receivables (10,000)
inventory ( 4,000)
Basis available for land and building* $12,000
× $12,000 = $8,000 basis for building*
Page Ref.: C:10-6

Objective: 1

A) The basis for property distributed by a partnership cannot be increased above the carryover basis
amount when it is received by a partner in a nonliquidating distribution.
B) A partner's partnership capital account balance cannot be less than zero.
C) The length of time a partner owns a partnership interest is relevant when determining the holding
period for distributed property.
Answer: A
Page Ref.: C:10-7
Objective: 1

A) If a partner sells property received in a partnership distribution for a gain and the property was
inventory in the hands of the distributing partnership, the partner will always recognize ordinary
income.
B) The primary purpose of Sec. 751 is to prevent partnerships from converting capital gains into ordinary
income.
C) Unrealized receivables include rights to payments on the sale of a capital asset.
Answer: D
Objective: 2
9
A) The depreciation recapture potential for a Sec. 1245 property is not included in the definition of a Sec.
751 asset.
B) For Sec. 751 purposes, "substantially appreciated inventory" means property held for sale to customers
whose market value exceeds its adjusted basis.
C) Inventory for Sec. 751 purposes includes all property except cash, capital assets, and Sec. 1231 assets
assets.
Answer: C
Page Ref.: C:10-8
Objective: 2
31) For purposes of Sec. 751, inventory includes all of the following except
A) capital assets or 1231 property.
B) items held for sale in the ordinary course of business.
C) accounts receivable.
D) All of the above are inventory per Sec. 751.
Answer: A
Page Ref.: C:10-8
Objective: 2
32) The AB Partnership has a machine with an FMV of $25,000 and a basis of $20,000. The partnership has
taken an $8,000 depreciation on the machine. The unrealized receivable related to the machine is
A) $0.
B) $5,000.
C) $8,000.
D) $20,000.
Answer: B
Objective: 2
33) The Internal Revenue Code includes which of the following assets in the definition of Sec. 751
properties?
A) inventory, which is substantially appreciated
B) cash
C) capital assets
D) Sec. 1231 assets
Answer: A
Page Ref.: C:10-8
Objective: 2
34) The definition of "inventory" for purposes of Sec. 751 includes

A) cash.
B) land held for investment.
C) marketable securities not held by dealers.
D) depreciation recapture potential on Sec. 1231 assets.
Answer: D
Page Ref.: C:10-8
Objective: 2
10
35) The definition of "unrealized receivable" does not include the
A) right to payment for services performed by a cash-basis taxpayer.
B) recapture potential on Sec. 1245 property.
C) recapture potential on Sec. 1250 property.
D) right to payment for services performed by an accrual-basis taxpayer.
Answer: D
Page Ref.: C:10-8
Objective: 2
36) What is the definition of "substantially appreciated inventory"?

A) inventory with a FMV greater than its basis
B) inventory and unrealized receivables with a FMV greater than their basis
C) inventory with a FMV greater than 120% of its basis
D) inventory and unrealized receivables with a FMV greater than 120% of their basis
Answer: D
Page Ref.: C:10-8
Objective: 2
37) The ABC Partnership owns the following assets on December 31.
Basis FMV
Cash $20,000 $20,000
Unrealized receivables 0 40,000
Inventory $20,000 30,000
Land (Sec. 1231 asset) 50,000 90,000
The indication that ABC owns substantially appreciated inventory is

A) the total FMV of all assets except cash is greater than their total basis.
B) the FMV of all assets except land is $90,000 while their bases is $40,000.
C) the FMV of the inventory is $30,000 while its adjusted basis is $20,000.
D) the FMV of the inventory and unrealized receivables is $70,000 while their adjusted bases is $20,000.
Answer: D
Page Ref.: C:10-8 and C:10-9; Example C:10-11
Objective: 2
11
38) The XYZ Partnership owns the following assets on December 31:
Basis FMV
Cash $20,000 $20,000
Inventory $30,000 35,000
Land (Sec. 1231 asset) 40,000 70,000
By how much must XYZ reduce its unrealized receivables to avoid meeting the substantially appreciated
inventory test?
A) $10,000
B) $14,000
C) $15,000
D) No amount of reduction of unrealized receivables will affect meeting the substantially appreciated
inventory test.
Answer: B
Explanation: B) ($15,000 + $35,000) - (120% × $30,000) = $14,000
Objective: 2
12
39) The XYZ Partnership owns the following assets on December 31:
Basis FMV
Cash $10,000 $10,000
Inventory $25,000 30,000
A partner has a 20% interest with a basis of $6,000 in XYZ before receiving a liquidating distribution of
$10,000 cash. XYZ Partnership has no liabilities. His recognized gain is
A) $4,000 capital gain.
B) $3,000 capital gain and $1,000 ordinary income.
C) $3,000 ordinary income.
D) $3,000 ordinary income and $1,000 capital gain.
Answer: D
Explanation: D) The partner's recognized gain is made up of two components: (1) the amount by which
the proceeds of the deemed sale of the Sec. 751 assets (receivables and inventory) exceeds the basis for
such property when received by the partner in a current distribution, and (2) the amount by which the
remainder of the distribution exceeds the remainder of the partner's basis in the partnership interest.
(1) FMV of receivables and inventory [0.20 × ($10,000 + $30,000)] $8,000

Minus: basis of receivables and inventory if they
had been distributed in a current distribution
[0.20 × (0 + $25,000)] ( 5,000)
Ordinary income recognized $3,000
(2) Predistribution basis $6,000
Minus: basis of Sec. 751 assets deemed distributed ( 5,000)
Remaining basis in partnership interest $1,000
Minus: cash distributed after Sec. 751 transaction ( 2,000)
Excess distribution and capital gain $1,000
Objective: 2

A) A liquidating distribution that terminates a partnership interest cannot include more than one
distribution.
B) A partnership with a large amount of unrealized receivables and substantially appreciated inventory
items liquidated and distributed all of its assets in kind to each partner in proportion to their partnership
interests. Each partner will report ordinary income at the time these assets are received equal to their
FMV.
C) The rule for recognizing gain on a liquidating distribution is the same rule that is used for a current
distribution.
Answer: C
Page Ref.: C:10-12
Objective: 3
13
A) When unrealized receivables are distributed in a liquidating distribution, the basis of the receivables
will be increased.
B) The bases of unrealized receivables and inventory distributed by a partnership in liquidation of a
partnership interest are never increased above their bases in the hands of the partnership.
C) The basis of the partnership interest is apportioned between all of the assets received in a liquidating
distribution based on the relative FMVs of the assets.
Answer: B
Page Ref.: C:10-12
Objective: 3
42) Ted King's basis for his interest in the Troy Partnership is $24,000. In complete liquidation of his
interest, King receives cash of $4,000 and real property (not a Sec. 751 asset) having an FMV of $40,000.
Troy's adjusted basis for this realty is $15,000. Section 736 does not apply. King's basis for this realty is
A) $15,000.
B) $20,000.
C) $36,000.
D) $40,000.
Answer: B
Explanation: B)
Minus: cash received ( 4,000)
Basis to partner $20,000
Page Ref.: C:10-12
Objective: 3
43) Derrick's interest in the DEF Partnership is liquidated when his basis in the interest is $30,000. He
receives a liquidating distribution of $20,000 cash and inventory with a basis of $8,000 and an FMV of
$30,000. Derrick will recognize
A) no gain or loss.
B) $2,000 capital loss.
C) $2,000 ordinary loss.
D) $10,000 capital loss and $20,000 ordinary loss.
Answer: B
Objective: 3
14
44) Before receiving a liquidating distribution, Kathy's basis in her interest in the KLM Partnership is
$30,000. The distribution consists of $5,000 in money, inventory having a $1,000 basis to the partnership
and a $2,000 FMV, and two parcels of undeveloped land (not held as inventory) having basis of $3,000
and $9,000 to the partnership with FMVs of $5,000 and $12,000, respectively. What is Kathy's basis in each
parcel of land?
A)
Parcel One Parcel Two
$5,000 $12,000
B)
$3,000 $9,000
C)
$7,059 $16,941
D)
$6,000 $18,000
Answer: C
Explanation: C) Basis allocated to parcels = $30,000 - $5,000 - $1,000 = $24,000
Parcel One Parcel Two Total

FMV $5,000 $12,000 $17,000
- Partnership basis ( 3,000) ( 9,000) ( 12,000)
Difference $2,000 $ 3,000 $ 5,000
Step 1: Basis $3,000 $ 9,000 $12,000
- Kathy's basis (24,000)
Increase to allocate $12,000
Step 2: Basis after Step 1 $3,000 $ 9,000 $12,000
Allocate appreciation difference
2,000 3,000 5,000
Adjusted Basis - Step 2 $5,000 $12,000 $17,000
Step 3: Allocate remainder 2,059* 4,941** 7,000
Kathy's basis in parcels $7,059 $16,941 $24,000
*$5,000 ÷ ($5,000 + $12,000) × 7,000 = 2,059

**$12,000 ÷ ($5,000 + $12,000) × 7,000 = 4,941
Objective: 3
15
45) Ten years ago, Latesha acquired a one-third interest in Dana Associates, a partnership, for $26,000
cash. This year, Latesha's entire interest in the partnership is liquidated when her basis is $24,000. Dana's
assets consist of the following: cash, $20,000; inventory with a basis of $46,000 and an FMV of $40,000.
Dana has no liabilities. Latesha receives the cash of $20,000 in liquidation of her entire interest. What is
Latesha's recognized loss on the liquidation of her interest in Dana?
A) $0
B) $4,000 long-term capital loss
C) $4,000 short-term capital loss and $2,000 ordinary loss
D) $4,000 long-term capital loss and $2,000 ordinary loss
Answer: B
Explanation: B)
Minus: liquidating distribution ( 20,000)
Long-term capital loss $ 4,000
Page Ref.: C:10-14
Objective: 3

A) On December 31 of the current year, Max Curcio's adjusted basis for his interest in the Maduro &
Motta Partnership is $36,000. Maduro & Motta distributes cash of $6,000 and a parcel of land held as an
investment to Curcio in liquidation of his entire interest in the partnership. The land has an adjusted basis
of $18,000 to the partnership and an FMV of $42,000. Curcio's basis in the land is $18,000.
B) Jake has a basis in his partnership interest of $40,000 before receiving a liquidating distribution of
$5,000 cash, inventory with a basis of $4,000 and an FMV of $5,000, and land with a basis of $3,000 and an
FMV of $6,000. Jake will receive no further distributions. He can recognize a loss of $28,000 at the time the
liquidating distribution is received.
C) A partner's holding period for a partnership interest is never considered when determining the
holding period for property distributed in a liquidating distribution.
Answer: C
Page Ref.: C:10-14
Objective: 3
47) Identify which of the following statements is false.

A) On June 30 of the current year, James Roe sells his interest in the Roe & Doe Partnership for $30,000.
Roe's adjusted basis in Roe & Doe at June 30 is $7,500 before apportionment of any partnership income
for the current year. The Roe & Doe Partnership uses the calendar year as its tax year and has no
liabilities on June 30. Roe's distributive share of partnership income up to June 30 is $22,500. Roe acquired
his interest in the partnership five years ago. Roe will have a long-term capital gain on the sale of his
interest of $22,500.
B) Section 751 assets include all inventory and all unrealized receivables in a sale or exchange situation.
C) When a partnership interest is sold, the buyer and seller can allocate the sale price among the Sec. 751
assets and non-Sec. 751 assets in any reasonable manner.
D) Statements B and C are true.
Answer: A
Objective: 3
16
48) Kenya sells her 20% partnership interest having a $28,000 basis to Ebony for $40,000 cash. At the time
of the sale, the partnership has no liabilities and its assets are as follows:
Basis FMV
Cash $20,000 $20,000
Inventory 10,000 40,000
Land (Sec. 1231) 110,000 100,000
Kenya and Ebony have no agreement concerning the allocation of the sales price. Ordinary income
recognized by Kenya as a result of the sale is
A) $6,000.
B) $12,000.
C) $14,000.
D) $16,000.
Answer: C
Explanation: C)
Total Sec. 751 Assets Non-Sec. 751 Assets
Amount realized $40,000 $16,000 $24,000
Minus: adjusted
basis (28,000) (2,000) (26,000)
Recognized $12,000 $14,000 ($2,000)
gain/loss Ordinary income Capital loss
Objective: 3
17
49) Steve sells his 20% partnership interest having a $28,000 basis to Nancy for $40,000 cash. At the time
of the sale, the partnership has no liabilities and its assets are as follows:
Basis FMV
Cash $20,000 $20,000
Inventory 10,000 40,000
Land (Sec. 1231) 110,000 100,000
The receivables and inventory are Sec. 751 assets. There is no agreement concerning the allocation of the
sales price. Steve must recognize
A) no gain or loss.
B) $12,000 ordinary income.
C) $12,000 capital gain.
D) $14,000 ordinary income and $2,000 capital loss.
Answer: D
Explanation: D)
Total Sec. 751 Assets Non-Sec. 751 Assets
Amount realized $40,000 $16,000 $24,000
Minus: adjusted
basis (28,000) (2,000) (26,000)
Recognized $12,000 $14,000 ($2,000)
gain/loss Ordinary income Capital loss
Objective: 3

A) John Albin is a retired partner of Brill & Crum, a personal service partnership. Albin has not rendered
any services to Brill & Crum since his retirement six years ago. Under the provisions of Albin's retirement
agreement, Brill & Crum is obligated to pay Albin 10% of the partnership's net income each year through
the end of the current year. In compliance with the agreement, Brill & Crum pay Albin $25,000 in the
current year. Albin should treat this $25,000 as a long-term capital gain.
B) An exchange of partnership interests in different partnerships qualifies under the like-kind exchange
rules.
C) The payment for partnership property to a retiring partner is not deductible by the partnership and
often not income to the retiring partner.
Answer: C
Page Ref.: C:10-19
Objective: 4
18
51) For tax purposes, a partner who receives retirement payments ceases to be regarded as a partner
A) on the last day of the taxable year in which the partner retires.
B) on the last day of the month in which the partner retires.
C) on the day on which the partner retires.
D) only after the partner's last payment is received.
Answer: D
Page Ref.: C:10-20
Objective: 4
52) If a partnership chooses to form an LLC, under the check-the-box rules, and assuming no elections are
made, the entity will be taxed as
A) a partnership if it has more than one member.
B) an S corporation.
C) a C corporation.
D) Unable to determine from the facts presented.
Answer: A
Page Ref.: C:10-21
Objective: 4

A) Under the check-the-box rules, an LLC with more than one member is taxed as a corporation unless it
elects to be taxed as a partnership.
B) The partnership's tax year closes with respect to a partner whose interest is transferred by gift.
C) An LLC has been taxed as a partnership for five years. Under the check-the-box rules, the LLC makes a
timely election in 2009 to be taxed as a C corporation. The election of C corporation status is permitted
and results in the LLC's assets being transferred from a partnership to a C corporation under the federal
income tax rules.
Answer: C
Page Ref.: C:10-21
Objective: 4
54) If a partner dies, his or her tax year closes

A) on the date of death.
B) on the day after death.
C) on the day before death.
D) on some other date.
Answer: A
Page Ref.: C:10-22
Objective: 4
19
55) A partnership terminates for tax purposes
A) only when it terminates under local partnership law.
B) when at least 50% of the total interest in partnership capital and profits changes hands by sale or
exchange within twelve consecutive months.
C) when the sale of partnership assets is made only to an outsider(s) and not to an existing partner(s).
D) when a partnership tax return (Form 1065) ceases to be filed by the partnership.
Answer: B
Page Ref.: C:10-22
Objective: 4
56) Marc is a calendar-year taxpayer who owns a 30% capital and profits interest in the MN Partnership.
Nancy sells the remaining 70% capital and profits interest to Henry on October 31. The partnership year-
end is March 31 as permitted by the IRS for business purpose reasons. The MN Partnership
A) terminates on March 31.
B) terminates on October 31.
C) terminates on December 31.
D) does not terminate.
Answer: B
Page Ref.: C:10-22
Objective: 4
57) A partnership terminates for federal income tax purposes if

A) a general partner who owns a majority interest dies.
B) state partnership law terminates the partnership.
C) a partnership interest of more than 50% is gifted.
D) within a 12-month period there is a sale or exchange of at least 50% of the total interest in partnership
capital and profits.
Answer: D
Objective: 4

A) The partnership tax year closes when a partner transfers his interest by gift.
B) If a partner dies in a two-member partnership, the partnership terminates on the date of death, even
though the successor-in-interest continues to share in the profits and losses of the partnership business.
C) When the interest of a partner who owns 60% of a partnership is completely liquidated by a
partnership distribution, the partnership is considered terminated, even though three other partners
remain.
Answer: D
Objective: 4
20
59) Identify which of the following statements is false.
A) A sale or exchange of at least 50% of the capital and profits interest in a partnership within a 12-
consecutive-month period will terminate the partnership and end all of the partnership's elections.
B) When using the 50% rule to terminate a partnership, if an interest is sold more than once during the 12-
month period, each sale is counted separately.
C) A partner's individual income tax return, under some circumstances, may include the results of
partnership operations for a period exceeding 12-months.
D) When several different transfers are made during a 12-month period, the partnership termination
occurs on the date of the transfer that first crosses the 50% threshold.
Answer: B
Objective: 4
60) Sally is a calendar-year taxpayer who owns a 30% capital and profits interest in the SEM
Partnership. Eric sells the remaining 70% capital and profits interest to Michelle on October 3. The
partnership year-end is March 31 as permitted by the IRS for business purposes. Which of the following
statements is correct?
A) Sally must conform her tax year with the partnership tax year.
B) The new partnership is a continuation of the old partnership.
C) Sally's tax return will include a partnership distributive share only for the period ending March 31.
D) Sally's tax return will include partnership distributive shares for periods ending March 31 and October
3.
Answer: D
Objective: 4
21
61) The LM Partnership terminates for tax purposes on July 15 when Latasha sells her 60% capital and
profits interest to Zoe for $100,000. The partnership has no liabilities, and its assets at the time of
termination are as follows:
Assets Basis FMV

Cash $ 20,000 $ 20,000
Receivables 10,000 12,000
Inventory 22,000 28,000
Building 80,000 85,000
Land 30,000 21,667
Total $162,000 $166,667
Marika, a 40% partner in the LM Partnership, has a $64,800 basis in her partnership interest (outside
basis) at the time of the termination. She has held her LM Partnership interest for three years at the time
of the termination. The bases of Marika and Zoe in the new LM Partnership is:
A)
Marika Zoe
$64,800 $ 97,200
B)
Marika Zoe
$66,667 $100,000
C)
Marika Zoe
$64,800 $100,000
D)
Marika Zoe
$66,667 $ 97,200
Answer: C
Objective: 4
62) The AB, BC, and CD Partnerships merge into the ABCD Partnership. AB (owned by Austin and Ben)
contributes assets worth $100,000. BC (owned by Ben and Charlie) contributes assets worth $200,000. CD
(owned by Charlie and Dennis) contributes assets worth $300,000. The capital and profits interest in
ABCD is owned by: Austin, 10%; Ben, 30%; Charlie, 25%; and Dennis, 35%. ABCD Partnership is a
continuation of
A) AB.
B) BC.
C) CD.
D) none of the partnerships.
Answer: C
Objective: 4
22
63) Han purchases a 25% interest in the CHOP Partnership from Huang for $600,000. The partnership has
assets with a basis of $1,600,000. What is the amount of the basis adjustment, if the partnership has a 754
election in place?
A) $0
B) $150,000 increase in Han's basis in his partnership interest
C) $200,000 increase in Han's share of the basis in partnership assets
D) $1,000,000 increase in partnership assets
Answer: C
Page Ref.: C:10-26
Objective: 5
64) Patrick purchases a one-third interest in the PPP partnership for $600,000. The partnership has assets
with a value of $1,500,000. PPP has a 754 election in effect. What is the amount of the basis adjustment?
A) $0
B) $300,000 increase in the basis of partnership assets
C) $100,000 increase in Patrick's basis in the partnership assets
D) $100,000 increase in Patrick's share of the basis in the partnership assets
Answer: D
Page Ref.: C:10-26
Objective: 5
65) Which of the following statements is correct?

A) A partnership may make an annual election to adjust the basis of its assets upon the sale of a
partnership interest.
B) The Sec. 754 election applies to both sales and distributions.
C) The Sec. 754 election applies to only current and nonliquidating distributions.
D) A partnership can revoke a Sec. 754 election every 5 years.
Answer: B
Objective: 5
66) Which of the following is valid reason for making a 754 election?
A) An incoming partner pays more for a partnership interest that his or her proportionate share of
partnership assets.
B) Partners are able to increase their basis in the partnership interest upon the sale of a partnership
interest.
C) Partnerships can increase, but not decrease, their basis in partnership assets.
D) A partnership can reduce its basis in assets upon cash distributions to partners.
Answer: A
Page Ref.: C:10-27
Objective: 5
23
67) Patrick purchased a one-third interest in the PPP partnership for $600,000. At the time of the
purchase, the partnership had a 754 election in effect and its only asset was land with a basis of
$1,500,000. This year, PPP sells the land for $1,800,000. What is Patrick's recognized share of the gain on
the sale of the land?
A) $0
B) $100,000
C) $300,000
D) none of the above
Answer: A
Explanation: A) $1,800,000 - 1,500,000 = 300,000 gain. Patrick's share of the gain is $100,000, which is
offset by the $100,000 754 adjustment. The 754 adjustment is 600,000 purchase price - (1,500,000/3) =
100,000.
Objective: 5
68) When must a partnership make mandatory basis adjustments?

A) on any sale of a 20% or greater partnership interest
B) on any sale of a partnership interest for $250,000 or more
C) on any distribution of assets with a value of $250,000 or more
D) on any sale of a partnership interest where the partnership's adjusted basis in its assets exceeds their
fair market value by $250,000 or more
Answer: D
Page Ref.: C:10-27
Objective: 4

A) When a partnership is divided into two or more new partnerships, all of the resulting partnerships
must be considered new partnerships.
B) A partnership is "publicly traded" only if its interests are traded on an established securities exchange.
C) A limited liability company is a form of business entity that combines the legal benefits of the
corporate form with the tax benefits of the partnership form.
Answer: C
Objective: 6
70) The STU Partnership, an electing Large Partnership, has no passive activities and reports the
following transactions for the year: net long-term capital losses $50,000, Sec. 1231 gain $60,000, ordinary
income $20,000, charitable contributions $15,000, and tax-exempt income $2,000. How much will be
reported as ordinary income to its partners?
A) $5,000
B) $17,000
C) $20,000
D) $22,000
Answer: B
Explanation: B) [$20,000 - 10% (10,000 + 20,000)] = $17,000
Page Ref.: C:10-32
Objective: 6
24
71) The STU Partnership, an electing Large Partnership, has no passive activities and reports the
following transactions for the year: net long-term capital losses $50,000, Sec. 1231 gain $60,000, ordinary
income $20,000, charitable contributions $15,000, and tax-exempt income $2,000. How much will be
reported as long-term capital gains to its partners?
A) $0
B) $10,000
C) $50,000
D) $60,000
Answer: B
Page Ref.: C:10-32
Objective: 6
72) Two years ago, Tom contributed investment land with a basis of $50,000 and FMV of $62,000 to the
RST Partnership. This year, Tom has a basis in his partnership interest of $53,000 when he receives a
current distribution of $14,000 cash and inventory with a basis of $35,000 and FMV of $52,000. (There is
no Sec. 751 exchange in connection with the inventory distribution.) The partnership continues to hold
the land Tom contributed. How much gain (if any) must Tom recognize as a result of this distribution?
Answer: Precontribution gain = $62,000 - $50,000 = $12,000

Minus: cash distribution ( 14,000)
$39,000
Minus: FMV of distribution other than cash ( 52,000)

Tentative Sec. 737 gain $13,000
Recognized gain = $12,000 [the smaller of precontribution gain ($12,000) or tentative Sec. 737 gain
($13,000)].
Objective: 1
73) On November 30, Teri received a current distribution of cash of $4,000, marketable securities with a
basis of $24,000 and an FMV of $30,000, and inventory with a basis of $2,000 and an FMV of $6,000. Prior
to the distribution, Teri's basis in her interest in the partnership was $30,000. (There is no Sec. 751
exchange as a result of the distribution.) How much gain (if any) must Teri recognize as a result of the
distribution?
Answer:
Minus: money received (cash and FMV of marketable securities) (34,000)
Gain recognized $ 4,000
Page Ref.: C:10-3
Objective: 1
25
74) Jerry has a $50,000 basis for his interest in JJ Partnership before receiving a current distribution
consisting of $8,000 in money, accounts receivable having a zero basis to the partnership, and land having
a $28,000 basis to the partnership. What will Jerry's basis be in these assets?
Answer: Generally, the partner's basis for property distributed by the partnership carries over from the
partnership. Jerry will take the carryover basis in the land and receivables.
Objective: 1
75) Jerry has a $50,000 basis for his interest in JJ Partnership before receiving a current distribution
consisting of $8,000 in money, accounts receivable having a zero basis to the partnership, and land having
a $28,000 basis to the partnership. What is Jerry's basis in his partnership interest after the distribution?
Answer:
Predistribution basis in JJ $50,000
carry over basis in A/R (0)
carry over basis in land (28,000)
Postdistribution basis in JJ $14,000
Objective: 1
76) Last year, Cara contributed investment land with an FMV of $24,000 and basis of $18,000 to the CDE
Partnership. CDE made no distributions during last year, and Cara's basis in her partnership interest on
December 31 of last year was $28,000. On January 1 of this year, the partnership distributed cash of
$30,000 to Cara and distributed the land contributed by Cara to another partner, David. On the
distribution date, the land had a $27,000 FMV. Assume the CDE Partnership reported no profit or loss
this year. How much gain (if any) must Cara recognize as a result of the distributions? What is her basis
in the partnership after the distributions?
Answer: Cara must recognize a $6,000 capital gain ($24,000 FMV at contribution - $18,000 basis at
contribution) on the distribution of the land to David. The gain recognized increases Cara's basis in her
partnership interest.
Cara's predistribution basis $28,000

Plus: precontribution gain recognized 6,000
$34,000
Minus: cash distribution ( 30,000)

Cara's basis after distribution $ 4,000
No income is recognized as a result of the cash distribution.

Objective: 2
26
77) The TK Partnership has two assets: $20,000 cash and a machine having a $28,000 basis and a $40,000
FMV. The partnership has claimed $16,000 in depreciation on the machine since its purchase. If the
machine is sold for its FMV, would TK Partnership have an unrealized receivable item?
Answer: Yes. All of the $12,000 gain would be an unrealized receivable, since it is recaptured under Sec.
1245. Primary examples of unrealized receivables are the potential ordinary income recapture items like
Sec. 1245 or Sec. 1250.
Objective: 2
78) The Tandy Partnership owns the following assets on December 31:
Assets Basis Fair Market Value

Cash $20,000 $ 20,000
Inventory 20,000 25,000
Land, Sec. 1231 property 35,000 70,000
Total $75,000 $145,000
Is the partnership's inventory considered to be substantially appreciated for purposes of Sec. 751? Show
your work.
Answer: For purposes of the substantially appreciated inventory test, both Tandy's unrealized
receivables and inventory are included. The "inventories" FMV of $55,000 exceeds 120% of its adjusted
basis, $20,000. Therefore, the Tandy Partnership has substantially appreciated inventory.
Objective: 2
27
79) The CHS Partnership's balance sheet presented below is prepared on a cash basis at September 30 of
the current year.

Cash $12,000 $ 12,000
Accounts receivable 0 48,000
Land (capital asset) 63,000 90,000
Total $75,000 $150,000
Equities Basis Fair Market Value

Notes payable $30,000 $ 30,000
Cindy, Capital 15,000 40,000
Helen, Capital 15,000 40,000
Sally, Capital 15,000 40,000
Total $75,000 $150,000
Cindy withdraws from the partnership under an agreement whereby she takes one-third of each of the
three assets and assumes $10,000 of the notes payable. Her basis for the partnership interest before any
distribution is $25,000. What gain/loss should she report for tax purposes?
Answer: No gain or loss is recognized by Cindy or the partnership on the distribution of the Sec. 751
properties, since Cindy received only her proportionate share of the partnership's assets and liabilities
and the amount of cash deemed distributed ($14,000 = $4,000 cash + $10,000 release from liabilities) is less
than her $25,000 ($15,000 + $10,000 liabilities) basis for the partnership interest.
Objective: 3
80) Adnan had an adjusted basis of $11,000 for his interest in the Adnan and Donnell Partnership on
December 31. On this date, Adnan received from the partnership, in complete liquidation of his interest,
$10,000 cash and land with a $2,000 basis to the partnership and a $3,000 FMV. What is Adnan's basis for
the land distributed to him?
Answer: $11,000 - $10,000 cash = $1,000 remaining basis. This basis is assigned to the land.
Page Ref.: C:10-12
Objective: 3
81) Eicho's interest in the DPQ Partnership is terminated when her basis in the partnership is $70,000. She
receives a liquidating distribution of $20,000 cash and inventory with a $24,000 basis and a $40,000 FMV.
What is her gain or loss, and what is her basis in the inventory received?
Answer: She has a recognized loss of $26,000 [($20,000 + $24,000) - $70,000]. Her basis in the inventory
she receives is $24,000.
Objective: 3
28
82) Eicho's interest in the DPQ Partnership is terminated when her basis in the partnership is $70,000. She
receives a liquidating distribution of $20,000 cash and inventory with a $24,000 basis and a $40,000 FMV.
She also receives, as part of the distribution, a desk that has a $100 basis and a $200 FMV to the
partnership. What is her gain or loss, and what is her basis in the items received?
Answer: She does not recognize any loss currently. The bases are computed as follows:
Predistribution basis in DPQ $70,000

Basis after money distribution 50,000
Minus: basis of inventory to DPQ ( 24,000)
Remaining basis of partnership interest $26,000
The entire $26,000 is allocated to the desk. This delays the loss recognition until the desk is either
depreciated or sold.
Objective: 3
29
83) On December 31, Kate receives a $28,000 liquidating distribution from the KLM Partnership. On that
date, Kate's basis in her limited partnership interest is $18,000 (which, of course, includes her share of
partnership liabilities). The other partners assume her $6,000 share of liabilities. Just prior to the
distribution, the partnership has the following balance sheet. Kate is leaving the partnership but the
partnership is continuing.

Cash $30,000 $ 30,000
Inventory 15,000 25,000
Land 45,000 90,000
Total $90,000 $165,000

Kate, capital 12,000 27,000
Lynn, capital 24,000 54,000
Mark, capital 24,000 54,000
Total $90,000 $165,000
What is the amount and character of the gain that Kate must recognize on the liquidating distribution?
Answer: Divide the payments between Sec. 736(a) and Sec. 736(b) payments.
Total received ($28,000 + $6,000) $34,000

Minus: FMV of assets (Sec. 736(b)) ( 33,000)
Sec. 736(a) payment - guaranteed payment taxable as ordinary income $ 1,000
Analysis of the Sec. 736(b) payment of $33,000.

Kate is first deemed to receive her share of Sec. 751 assets from the partnership and then immediately sell
them to the partnership for cash.
Sec. 751 Assets
Amount realized - FMV $ 9,000
Minus: adjusted basis ( 3,000)
Ordinary income $ 6,000
The remaining Sec. 736(b) payment of $24,000 ($33,000 - $9,000 deemed paid for the Sec. 751 assets) is
analyzed as a liquidating distribution.
Predistribution basis in partnership $18,000

Minus: Sec. 751 deemed distribution ( 3,000)
Basis in partnership interest after Sec. 751 transaction $15,000
Minus: remaining Sec. 736(b) distribution ( 24,000)
Excess or capital gain to be recognized $ 9,000
Summary: Kate recognizes a $1,000 guaranteed payment, $6,000 of ordinary income, and a $9,000 capital
gain.
Objective: 3
30
84) The HMS Partnership, a cash method of accounting entity, has the following balance sheet at
December 31 of last year:

Cash $51,000 $ 51,000
Total $51,000 $261,000

Henry, capital 7,000 77,000
Sam, capital 7,000 77,000
Total $51,000 $261,000
Sam, who has a one-third interest in profits, losses, and liabilities, sells his partnership interest to Beverly,
for $77,000 cash on January 1 of this year. Sam's basis in his partnership interest (which, of course,
includes a share of partnership liabilities) at the time of the sale was $17,000. In addition, Beverly assumes
Sam's share of the partnership liabilities. What is the amount and character of the gain that Sam will
recognize from this sale?
Answer: Amount realized = $77,000 +$10,000 liabilities assumed = $87,000.
Realized and recognized gain = $87,000 - $17,000 = $70,000.
The recognized gain is all ordinary income, since it equals his share of the unrealized receivables.
Objective: 3
31
85) On December 31, Kate sells her 20% interest (with a basis of $18,000 which, of course, includes a share
of partnership liabilities) in the KLM Partnership to Karl for $27,000 cash plus assumption of her $6,000
share of liabilities. On that date, the partnership has the following balance sheet:

Cash $30,000 $ 30,000
Inventory 15,000 25,000
Land 45,000 90,000
Total $90,000 $165,000

Kate, capital 12,000 27,000
Lynn, capital 24,000 54,000
Total $90,000 $165,000
What are the amount and character of the gain that Kate must recognize on the sale?
Answer:
Total Sec. 751 Assets Other
Amount realized $33,000 $ 9,000 $24,000
Minus: adjusted ( 18,000) ( 3,000) ( 15,000)
basis $15,000 $ 6,000 $ 9,000
Recognized gain Ordinary Capital
Character of gain
Objective: 3
86) Tony sells his one-fourth interest in the WindyCity Partnership to Bill for $100,000 cash when the
partnership's assets are as follows:

Cash $80,000 $ 80,000
Inventory 80,000 184,000
Land 80,000 64,000
Total $240,000 $400,000
The partnership has no liabilities on the sale date. Tony's basis in his partnership interest on the date of
the sale is $60,000. What is the amount of gain realized by Tony on the sale of his partnership interest?
Answer:
Amount realized on sale $100,000
Minus: adjusted basis of partnership interest ( 60,000)
Total gain realized $ 40,000
Objective: 3
32

Cash $80,000 $ 80,000
Inventory 80,000 184,000
Land 80,000 64,000
Total $240,000 $400,000
the sale is $60,000. What is the allocation of Tony's gain to the assets received?
Answer:
Deemed sale of assets Partnership gain (loss) Tony's share (25%)
Unrealized receivables 72,000 18,000
Inventory 104,000 26,000
Land ( 16,000) ( 4,000)
Objective: 3

Cash $80,000 $ 80,000
Inventory 80,000 184,000
Land 80,000 64,000
Total $240,000 $400,000
the sale is $60,000. What are the amount and character of Tony's gain?
Answer:
Deemed sale of assets Partnership gain (loss) Tony's share (25%)
Unrealized receivables 72,000 18,000
Inventory 104,000 26,000
Land ( 16,000) ( 4,000)
Since the unrealized receivables and the inventory are Sec, 751 property, Tony recognizes $44,000 of
ordinary income. The remaining $4,000 loss is a capital loss.
Objective: 3
33
89) Joshua is a 40% partner in the XY Partnership when he sells his entire interest to Stanley for $60,000
cash. At the time of the sale, Joshua's basis is $36,000, which includes his $10,000 share of partnership
liabilities. The partnership has no Sec. 751 assets. Calculate Joshua's gain or loss on the sale.
Answer:
Amount realized:
Cash $60,000
Liabilities assumed by purchaser 10,000 $70,000
Minus: adjusted basis 36,000
Gain recognized on sale $34,000
Objective: 3
90) Sean, Penelope, and Juan formed the SPJ partnership by each contributing assets with a basis and fair
market value of $200,000. In the following year, Penelope sold her one-third interest to Pedro for
$225,000. At the time of the sale, the SPJ partnership had the following balance sheet:
Basis FMV
Cash $200,000 $200,000
Land $400,000 $475,000
$600,000 $675,000
Shortly after Pedro became a partner, SPJ sold the land for $475,000. What are the tax consequences of the
sale to Pedro and the partnership (1) assuming there is no Section 754 election in place, and (2) assuming
the partnership has a valid Section 754 election?
Answer: (1) The partnership has a $75,000 gain ($475,000 - $400,000) and $25,000 of this gain is allocated
to Pedro. (2) Pedro's share of the basis of the land is increased by $25,000, the amount that he paid for the
partnership interest in excess of the basis of the partnership assets. This basis increase is allocated entirely
to the land. The partnership still has a $75,000 gain on the sale of the land, but Pedro's $25,000 share is
eliminated by the 754 adjustment to the basis of the land (1/3 × 475,000) - [(1/3 × 400,000) + 25,000] = 0.
Page Ref.: C:10-27
Objective: 5
91) What is included in the definition of unrealized receivables?

Answer: Unrealized receivables include not only the obvious cash-method accounts receivable that have
yet to be recognized but also most of the potential ordinary income recapture provisions. Therefore, the
term unrealized receivables is broader than it may appear.
Page Ref.: C:10-8
Objective: 2
92) Do most distributions made by a partnership require a Sec. 751 calculation?

Answer: No. Many current distributions are made pro rate to all partners, so Sec. 751 is not involved.
Even if the distribution is not pro rate, the distribution often does not create an exchange of an interest in
Sec. 751 assets for an interest in other assets. This exchange happens only when (1) the partner is reducing
his or her overall interest in the partnership, or (2) an explicit agreement provides that the distribution
results in a partner giving up all or part of his or her interest in some asset(s) maintained by the
partnership.
Page Ref.: C:10-11
Objective: 2
34
93) What conditions are required for a partner to recognize a loss upon receipt of a distribution from a
partnership?
Answer: A partner can recognize a loss on a distribution only if the distribution is a liquidating
distribution that consists of money, unrealized receivables, and inventory. The partner recognizes a loss if
the amount of money and the carryover basis of the receivables and inventory are less than the partner's
predistribution basis in his or her partnership interest.
Objective: 3
94) What is the character of the gain/loss on the sale of a partnership interest?
Answer: Because a partnership interest is generally a capital asset, the sale of a partnership interest
results in a capital gain or loss. However, if a partnership has Sec. 751 assets, the partner is assumed to
sell his or her share of Sec. 751 assets directly with a corresponding ordinary gain or loss being
recognized.
Page Ref.: C:10-16
Objective: 3
95) Can a partner recognize both a gain and a loss on the sale of a partnership interest? If so, under what
conditions?
Answer: A partner must divide the sale of a partnership interest into two transactions if the partnership
has Sec. 751 assets. First, the partner is deemed to sell his or her share of Sec. 751 assets for their FMV
with their adjusted bases to the partner, being the basis the Sec. 751 assets would have had if the partner
had received them in a current distribution. The remaining sales proceeds and the remaining adjusted
bases are then considered to be the amounts to be reported from the sale of the remainder of the
partnership interest (non-Sec. 751 assets). Possibly, one part of the transaction could generate a loss while
the other part could generate a gain.
Objective: 3
96) What are some advantages and disadvantages of making a Section 754 election?
Answer: Advantages: Without a 754 election, if a new partner purchases a partnership interest when the
partnership assets have a fair market value greater than their basis, the partner will be taxed on his/her
proportionate share of any gain on a subsequent sale of these assets in addition to paying a higher
purchase price for the partnership interest due to the assets' appreciation. The partner will not be able to
recover this "double taxation" until the partnership is liquidated, which may be several years in the
future. Sec. 754 prevents this timing problem by adjusting the partner's basis in partnership assets.
The Sec. 754 election has several disadvantages, including increased recordkeeping. Partners and/or the
partnership must maintain separate records showing the calculation and allocation of the basis
adjustment. Once a 754 election is made, adjustments are required on all subsequent sales and
distributions, even if the adjustment decreases the basis. For distributions, the basis adjustment belongs
to the partnership as a whole. The 754 election can only be revoked with IRS approval.
Objective: 5
35
97) What are the advantages of a firm being formed as a limited liability company (LLC) instead of as a
limited partnership?
Answer: From a legal standpoint, all the owners of a limited liability company (LLC) have limited
liability for the firm's debts. In a limited partnership, all general partners have significant liability for firm
debts. Under the check-the-box regulations, an LLC can choose whether to be taxed as a partnership or as
an association taxed as a corporation. If the LLC chooses partnership taxation, there is virtually no
difference between the taxation of the LLC and the limited partnership.
Page Ref.: C:10-30
Objective: 6
98) The limited liability company (LLC) has become a popular business form because of its limited
liability protection for its owner. The S corporation also provides limited liability protection for its owner.
What advantages does an LLC provide that are not available with an S corporation?
Answer:
• The LLC is taxed as a partnership under the check-the-box rules. As such, the basic operating
restrictions that are imposed on an S corporation do not apply to an LLC. These include, but are not
limited to: a 100 shareholder limit; restrictions on the type of eligible shareholders; a single class of stock;
and the limitation on amount of passive income that can be earned by an S corporation.
• The corporate-level taxes imposed on an S corporation, such as the built-in gains tax and excess net
passive income tax, do not apply to an LLC.
• The loss limitation is larger for an LLC than for an S corporation because of the treatment of general
debts incurred by the LLC under the partnership taxation rules.
• All states have enacted LLC laws, so that the problem with a lack of developed legal structure for
handling general legal problems has disappeared. The application of basic legal principles to S
corporations was no problem since in most cases they followed the basic rules for corporations.
Page Ref.: C:10-30
Objective: 6
99) What is an electing large partnership? What are the advantages to the partnership of electing to be
taxed under the electing large partnership rules?
Answer: An electing large partnership is a partnership that is not a service partnership, is not engaged in
commodity trading, has at least 100 partners, and files an election to be taxed as an electing large
partnership. The primary advantage to the partnership of electing to be an electing large partnership is
that the reporting of income to the large number of partners is simplified. Relatively few items are
separately stated so that the reporting process is more difficult than a corporation but easier than a
nonelecting partnership.
Objective: 6
36
100) All states have adopted laws providing for limited liability companies. Describe a limited liability
company (LLC).
Answer: An LLC often combines the legal benefits of a corporation with the tax benefits of a partnership.
Whether an LLC is characterized as a corporation or a partnership for federal tax purposes depends on
the number of corporate characteristics that are present. An LLC should be treated as a partnership if it
has the centralized management and limited liability characteristics of a corporation, but does not have
the free transferability of interest or continuity-of-life characteristics. If treated as a partnership, they offer
more flexibility than an S corporation in that there is no limit on the number of shareholders, the number
of classes of stock that can be outstanding, or the types of investments in related entities that can be
made. The increased flexibility being written into some of the state LLC laws concerning the various
corporate characteristics has resulted in the LLCs created in certain states being treated as corporations or
partnerships, depending upon the terms of the LLC's organizing document. However, the IRS
implemented a system that allows LLCs to designate via a check-the-box mechanism whether they wish
to be taxed as a partnership or as a corporation. It is anticipated that most new LLCs will desire to be
taxed as a partnership (their default treatment) when they have two or more owners.
Page Ref.: C:10-30
Objective: 6
101) When Rachel's basis in her interest in the RST Partnership is $40,000, she receives a current
distribution of office equipment. The equipment has an FMV of $60,000 and a basis of $50,000. Rachel will
not use the office equipment in a business activity. What tax issues should Rachel consider with respect to
the distribution?
Answer:
• Does Rachel recognize a gain or loss on the current distribution?
• What is Rachel's basis in the office equipment?
• When does Rachel's holding period begin for the property?
• Does any depreciation recapture carry over to Rachel from the partnership?
• What is Rachel's basis in her partnership interest following the distribution?
Rachel recognizes no gain or loss on the distribution. Her basis for the equipment would be a carryover
basis from the partnership ($50,000) if that were possible, but it is limited to her basis in her partnership
interest prior to the distribution ($40,000). Rachel's holding period for the office equipment includes the
holding period the partnership had for the property. Her basis in the partnership interest is zero
following the distribution.
Objective: 1
37
102) Ed receives a $20,000 cash distribution from the EV Partnership, which reduces his partnership
interest from one-third to one-fourth. The EV Partnership is a general partnership that uses the cash
method of accounting and has substantial liabilities. EV's inventory has appreciated substantially since it
was purchased. What issues should Ed consider with regard to the distribution?
Answer: Ed must determine:
• How much is his distribution?
• Does the partnership have Sec. 751 assets?
• If the partnership has Sec. 751 assets, did Ed exchange any interest in Sec. 751 assets for cash?
• How much ordinary income must Ed recognize if he exchanges Sec. 751 assets for cash?
• How must Ed treat any cash distribution received that exceeds the amount deemed to be part of the
Sec. 751 exchange?
The amount of the distribution includes both the cash and the relief from liabilities that he received when
his interest in the partnership changed from 1/3 to 1/4. It is likely that the partnership has Sec. 751 assets,
since we know the partnership inventory is substantially appreciated. Further, it is likely that the cash-
basis partnership has unrealized accounts receivable, and the partnership may have recapture potential if
it has any depreciable personalty. Again, it is likely that an exchange of Sec. 751 assets for cash occurred,
since Ed received only cash and probably gave up a portion of his interest (from 1/3 to 1/4) in each Sec.
751 asset. The amount of ordinary income is the difference between the amount of cash Ed is deemed to
have received for the Sec. 751 assets and the adjusted basis that Ed would have had in the Sec. 751 assets
had the Sec. 751 assets been distributed to Ed immediately before the deemed Sec. 751 sale (usually a
carryover from the partnership's basis in these Sec. 751 assets). Any cash or deemed cash exceeding the
amount deemed to be part of the Sec. 751 exchange is simply treated as a current distribution. The current
distribution will reduce his basis in his partnership interest. If the current distribution is greater than his
basis in the partnership interest, Ed will recognize gain because he receives cash exceeding his basis.
Objective: 2
38
103) David sells his one-third partnership interest to Diana for $60,000 when his basis in the partnership
interest is $48,000. On the date of sale, the partnership has no liabilities and the following assets:
Assets Basis FMV

Cash $40,000 $40,000
Inventory 18,000 27,000
Building 75,000 102,000
Land 11,000 11,000
The building is depreciated on a straight-line basis. What tax issues should David and Diana consider
with respect to the sale transaction?
Answer:
• Does the partnership have Sec. 751 assets?
• What is the amount and character of the gain on the sale of David's partnership interest?
There are no unrealized receivables, but the partnership does have inventory. David's gain is calculated
as follows:
Assets
Total Sec. 751 Other
Amount realized $60,000 $9,000 $51,000
Minus: adjusted basis (48,000) ( 6,000) (42,000)
Recognized gain $12,000 $3,000 $ 9,000
The gain attributable to the Sec. 751 assets is ordinary while the remainder of the gain is capital.
Objective: 3
39
104) Rod owns a 65% interest in the RRR Partnership, a general partnership, which he sells to the two
remaining partners — Roger and Regis. The three partners have agreed that Rod will receive $160,000 in
cash from the sale. Rod's basis in the partnership interest before the sale is $125,000, which includes his
$35,000 share of partnership recourse liabilities. The partnership has assets with a $310,000 FMV and a
$210,000 adjusted basis. What issues should Rod, Roger, and Regis consider before this sale takes place?
Answer: Roger and Regis should consider the following:
• The sale as contemplated will terminate the partnership. Is termination of the partnership desirable
for Roger and Regis?
• Will either individual have to recognize a gain? The recognition of gain is unlikely unless Roger and
Regis have a small basis relative to the cash held by the partnership and deemed distributed in the
liquidating distribution.
• What will be the basis for each of the assets? Under current Treasury Regulations, the termination
will be deemed to result in the old partnership contributing the property directly to the new partnership
so that no adjustment to asset bases is likely to occur.
• Will income be bunched into a single tax year if the partnership terminates? Termination of the
partnership closes a tax year. If the partnership has the same tax year-end as Roger and Regis, no
bunching of income will occur. If their tax years differ, however, some bunching will occur.
• When the partnership terminates, all elections are lost. Are there advantages or disadvantages from
losing all existing elections? There are a few advantageous tax year-ends for old partnerships that were
grandfathered when Congress enacted the rules about required partnership tax year-ends. The loss of this
tax benefit would be a significant disadvantage.
• Would liquidation by the partnership be more advantageous than a sale to the other partners?
Liquidation by the partnership cannot terminate the partnership.
Rod should consider:

• How much of his gain from the sale would be considered as a sale from his interest in Sec. 751 assets
and, therefore, taxed as ordinary income? His sale will result in ordinary income to the extent the FMV of
Sec. 751 assets exceeds the adjusted basis in those assets that Rod would have had if the assets had been
distributed to Rod just before he sold his interest in the partnership.
• Will the sale cause a bunching of income from the partnership for Rod? Since the sale of the entire
partnership interest closes the partnership tax year for the selling partner, the sale will cause bunching of
income if Rod's tax year-end is different from RRR's tax year-end.
• Could the transaction be structured in such a way that a liquidation by the partnership would be
more beneficial to Rod? Possibly. If Roger and Regis really do not want the partnership to terminate, they
may be willing to pay Rod more in a liquidating distribution than they were willing to pay for an outright
purchase.
Page Ref.: C:10-16 through C:10-19, C:10-22 through C:10-24
Objective: 4
40
105) Quinn and Pamela are equal partners in the QP Partnership. On December 30 of the current year, the
QP Partnership agrees to liquidate Quinn's partnership interest for a cash payment on December 30 of
each of the next five years. What tax issues should Quinn and Pamela consider with respect to the
liquidation of Quinn's partnership interest?
Answer:
• Does the partnership terminate for tax purposes?
• If so, when does the termination occur?
The partnership terminates since only one partner remains. The partnership terminates when the final
Sec. 736 payment is made.
Objective: 4
106) Brown Company recently has been formed as a limited liability company (LLC). Brown Company is
owned equally by three individuals—Gene, Susan, and Sandra—all of whom have substantial income
from other sources. Brown is a manufacturing firm and expects to earn approximately $130,000 of
ordinary income and $30,000 of long-term capital gain each year for the next several years. Gene will be a
full-time manager and will receive a salary of $60,000 each year. What tax issues should the owners
consider regarding the LLC's initial year of operations?
Answer:
• Should Brown choose to be taxed as a partnership or as a corporation?
• How much will be kept in the business for growth, and how much will be distributed to the owners
each year? The larger the percentage of earnings that will be distributed, the more advantageous a flow-
through entity such as a partnership can be.
• What is the marginal tax rate for Gene, Susan, and Sandra? If Gene, Susan, and Sandra have lower
marginal tax rates than does Brown, partnership status has advantages.
• How should Gene's pay for operating the business be structured? If the business is taxed as a
corporation, a generous but reasonable salary will decrease the amount of income subject to double
taxation. If the business is structured as a partnership, the partners need to decide whether to structure
the payment as distributive share, as an outright guaranteed payment, or whether to establish a
guaranteed minimum that may be some combination of the two.
Page Ref.: C:10-30
Objective: 6
41
107) The Principle Limited Partnership has more than 300 partners and is publicly traded. The Principle
was grandfathered under the 1987 Tax Act and has consistently been taxed as a partnership. In the
current year, The Principle Limited Partnership will continue to be very profitable and will continue to
pay out about 30% of its income to its owners each year. The managing partners of The Principle want to
consider the firm's options for taxation in the current and later years.
Answer: What method should The Principle Limited Partnership choose to use to operate under the
publicly traded partnership rules?
• Pay the annual 3.5% of gross income tax and continue to be taxed as a publicly traded partnership?
• Buy back enough interests (or restrict opportunities for trading) so that the partnership is no longer
publicly traded?
• Incorporate the entity and be taxed as a regular (C) corporation?
The best alternative will be a function of the amount of gross income, amount of taxable income, tax rates
of the partners, amount of profits the firm wants to retain, and costs of buying back partnership interests,
and/or restricting trading, or incorporating.
If The Principle Limited Partnership chooses to continue as a partnership, should it elect to come under
the electing large partnership rules?
• The election reduces the partnership's annual cost of providing information to partners but will
require some start-up cost to make the change. The election also has the advantage of making it more
difficult to accidentally terminate the partnership because of trades. However, the election significantly
reduces the partners' reporting and audit options.
Page Ref.: C:10-29
Objective: 6
42
Another random document with
no related content on Scribd:
la Galicie, tandis que Dedko promettait de ne pas attaquer la
Pologne.
Les choses s’arrangèrent ainsi ; Lubarte continua de régner sur
le pays, qui était sorti si heureusement de la crise. Mais Casimir
n’oubliait pas ses projets. Il se fit délier d’avance par le pape du
serment prêté à Dedko, s’assura de la neutralité des Tartares, et,
profitant de ce que les princes lithuaniens étaient engagés à
combattre les Allemands et ne pouvaient secourir Lubarte, il
s’empara inopinément, en 1349, de la Galicie et de la Volhynie
occidentale.
XI.
La lutte pour s’emparer de la Galicie
et de la Volhynie. — L’union de 1385.
La guerre, ravivée par l’expédition de Casimir en 1349, devait

durer plus de trente ans. Lubarte, aidé de ses parents, les princes
lithuaniens, essaya de reprendre la Galicie. Mais alors se manifesta
l’impuissance du nouvel état et de tout le système lithuanien en
général, qui, malgré sa grande étendue, n’était pas capable de
fournir une action militaire vigoureuse. Sa force consistait dans la
sympathie des peuples, dans l’absence d’opposition sérieuse, mais
dès qu’il rencontrait une résistance plus forte, comme il s’en
produisait surtout à la périphérie, il était incapable de la surmonter.
Engagés au nord dans des guerres continuelles avec les Allemands,
ce n’était que rarement que les princes lithuaniens pouvaient faire
sentir ailleurs le poids de leur force. Contre la Pologne, ils étaient
soutenus par les Tartares et ils réussirent de temps à autre à porter
à cet état des coups sensibles. Mais, dans la deuxième moitié du
XIVe siècle, leur expansion dans les pays ukrainiens, qui avaient été
autrefois soumis à la domination du Khan, troubla les bonnes
relations qu’ils entretenaient avec ce dernier.
Entre 1350 et 1360, Olguerd, fils de Ghedemine, grand-duc de
Lithuanie, après être intervenu dans les affaires de l’état de
Smolensk, s’empara d’abord de la principauté de Briansk, dans le
nord de l’ancienne principauté de Tchernihiv et se rendit maître
ensuite des principautés méridionales. A Tchernihiv, à Novhorod-
Siversky et à Starodoub, des princes lithuaniens montèrent sur le
trône ; dans les domaines de moindre importance les princes de
l’ancienne dynastie continuèrent à régner sous leur protection. A peu
près à cette époque, vers 1360, Olguerd plaça sur le trône de Kiev
un de ses fils, après avoir détrôné le prince local, qui était vassal des
Tartares. Ainsi les vastes territoires sur les deux rives du Dniéper,
qui avaient autrefois fait partie de l’ancienne principauté de Kiev et
de Péréïaslav, bien ruinés et bien dépeuplés, il est vrai, sous la
domination tartare, d’ailleurs en décadence, passèrent-elles aux
mains des lithuaniens. L’armée tartare s’avança bien au secours de
Kiev, mais, impuissante et désorganisée, elle fut mise en déroute par
Olguerd qui, non content de mettre la main sur les parties
méridionales du pays de Kiev, s’empara encore de la Podolie, où les
populations vivaient depuis longtemps sous la suzeraineté directe du
Khan. Les neveux d’Olguerd s’y installèrent dans les villes et se
mirent à y édifier des forteresses autour desquelles se ramassèrent
les populations dispersées par l’anarchie des hordes.
De cette façon, dans la deuxième moitié du XIVe siècle, la plus
grande partie des territoires ukrainiens se trouva sous la domination
des princes lithuaniens, qui n’en eurent que plus d’envie de
s’emparer de la Galicie et de la Volhynie, où s’était concentrée la vie
économique, intellectuelle et ecclésiastique ukrainienne, depuis que
l’émigration avait laissé dans un état arriéré les pays situés plus à
l’est. Mais ayant perdu l’appui des Tartares à la suite même de ces
conflits, ils ne furent plus en état d’arracher la Galicie aux Polonais.
Aussi, quoique les sympathies de la population fussent de son côté,
Lubarte ne put jamais s’emparer de ce pays, conquis grâce à l’union
de la Hongrie avec la Pologne.
Casimir, et aussi son successeur sur le trône de Pologne, Louis
d’Anjou, disposaient des forces réunies de ces deux états ; ils
jouissaient de l’appui du pape, à qui l’on avait promis d’établir des
évêchés catholiques dans les pays ukrainiens conquis, enfin, en
combinant leurs opérations avec celles des Allemands de Prusse et
de Livonie, avec lesquels ils avaient conclu une entente formelle, ils
voulurent tenter d’enlever à Lubarte même la Volhynie. Ils y
réussirent à plusieurs reprises : Kholm, Belz et même Vladimir
changèrent plusieurs fois de mains. Bientôt il ne resta plus à Lubarte
que la région méridionale de la Volhynie (Loutsk).
Cependant des difficultés dynastiques vinrent troubler l’union
hungro-polonaise, qui s’était accomplie, sous Casimir, en vertu du
traité ci-dessus mentionné.
Louis, pas plus que Casimir, n’avait d’héritier mâle, ce qui rendait
bien précaire l’union personnelle des deux états. Sans se rendre
bien compte de la portée de son action, il voulut réunir la Galicie à la
Hongrie et y installa des garnisons hongroises. Les magnats
polonais, qui gouvernaient la Pologne en son nom, s’en
offusquèrent. Ils élurent comme reine de Pologne une des filles de
Louis et non point celle qui avait été désignée pour lui succéder en
Hongrie, puis ils décidèrent de s’allier à la Lithuanie, où régnait le
jeune fils d’Olguerd, Iagaïl (Jagellon). Ils lui offrirent la main de leur
reine et la couronne, à condition qu’il consentît à incorporer à la dite
couronne tous les pays lithuaniens et ukrainiens sur lesquels il
régnait. Iagaïl accéda à ces conditions et un traité fut conclu, en
1385, à Krevo, ville de Lithuanie, entre lui et la délégation polonaise,
par lequel il s’engageait à quitter la religion orthodoxe et se faire
catholique, à faire baptiser la partie de la population lithuaniene, qui
ne l’était point encore et, ce qui est plus important, à « unir à
perpétuité à la couronne de Pologne les pays lithuaniens et russes ».
Ce traité mettait fin tout d’un coup à la compétition entre la
Lithuanie et la « couronne de Pologne » pour s’approprier les pays
ukrainiens et, en même temps, il allait permettre à l’influence
polonaise, politique et intellectuelle, de se faire sentir sans restriction
sur tous ces territoires, élargissant de beaucoup la sphère
d’influence créée par l’occupation de Casimir. C’était le point de
départ d’une orientation nouvelle de la vie sociale, morale et
politique ukrainienne, qui devait déterminer son évolution pour toute
une série de siècles. Il est même permis d’affirmer que la « période
polonaise » dans la vie et l’histoire d’une partie considérable de
l’Ukraine, n’est pas encore achevée aujourd’hui.
La première conséquence du traité fut la réoccupation de la
Galicie par la Pologne : les magnats, à l’aide des troupes
lithuaniennes, chassèrent les garnisons hongroises et rétablirent
partout l’administration polonaise. La Hongrie essaya bien de
protester, mais elle se trouvait justement dans une situation politique
difficile, qui ne lui permettait pas d’entamer une lutte à main armée
pour le moment. Ses « droits historiques » sur la Galicie devaient
rester inopérants pendant quatre siècles, lorsqu’ils servirent de
prétexte juridique, d’une façon bien inattendue du reste, lors du
partage de la Pologne, pour faire incorporer cette contrée — à
l’Autriche.
Quant aux autres pays ukrainiens, placés sous la suzeraineté ou
le protectorat lithuaniens, la nouvelle union faillit n’y pas réussir dès
le début. Les droits reconnus par Iagaïl aux Polonais furent
interprétés par eux dans ce sens que dorénavant le grand-duché de
Lithuanie n’existait plus et que par conséquent, tous les états
vassaux, qui en dépendaient, devaient être placés sous le
gouvernement immédiat de la Pologne. Ces prétentions
provoquèrent dans le grand-duché une vive alarme et une tempête
de protestations. Vitovte, cousin de Iagaïl et son ancien rival,
profitant du mécontentement général, se proclama grand-duc et
s’apprêta à engager contre lui une lutte décisive.
Mais en ce moment même les Tartares lui infligeaient sur la
Vorskla (1399) une terrible défaite, qui l’obligea d’accepter un
compromis avec Iagaïl et les Polonais. Le principe de l’union se
trouva sauvé, mais il reçut d’importantes restrictions pratiques, en ce
qui concerne la Lithuanie, par les traités subséquents (1401–1413).
Cet état demeura indépendant de fait, sous le gouvernement de son
grand-duc, qui, tout en reconnaissant sa vassalité envers le roi de
Pologne, n’en conservait pas moins sa pleine souveraineté, de sorte
que les pays de l’Ukraine orientale ne se trouvèrent pas soumis
directement à la Pologne.
XII.
Conséquences de l’Union.
La question de l’union et la réalisation probable du projet

polonais d’incorporer vraiment les pays « lithuaniens et russes »
(blancs-russiens et ukrainiens) à « la couronne de Pologne » ne
laissèrent pas d’atteindre sérieusement les intérêts des populations
indigènes, qui habitaient ces contrées. Le sort de la Galicie et de la
Volhynie sous la domination polonaise faisait prévoir les
changements qu’auraient à subir les autres pays au cas où ils
tomberaient sous le même joug.
Sous le sceptre des princes lithuaniens la vie nationale se
continuait dans les formes léguées par le royaume de Kiev. Les
nouveaux maîtres suivaient en général la ligne de conduite adoptée
par les grands ducs envers leurs sujets slaves : « ne touchons pas
aux vieilles coutumes, n’en introduisons pas de nouvelles ». Il va
sans dire que le nouveau système politique, surtout les besoins de la
défense, nécessitaient dans la pratique des changements
considérables dans le domaine juridique et social (organisation du
régime des terres, fondement juridique du droit de possession, etc.).
Mais là où les raisons d’état n’imposaient point de changement, les
autorités centrales et locales s’efforçaient de conserver les
anciennes formes et de les développer en les adaptant aux
nouvelles conditions.
Cela est surtout apparent dans les mœurs et la vie intellectuelle
et religieuse. L’ancienne langue, formée par l’usage de Kiev, plus ou
moins teintée de provincialisme, sert toujours d’instrument à la vie
pratique et administrative. Elle est même passée dans la pratique
administrative des pays purement lithuaniens, à défaut d’une langue
littéraire indigène. La religion orthodoxe continue à jouir de la faveur
des autorités comme religion d’état. Les nouveaux princes et les
seigneurs lithuaniens, qui s’installent dans les pays blanc-russiens et
ukrainiens, adoptent les mœurs locales dans leur vie privée, ils
comblent de bienfaits les cathédrales et les monastères célèbres, ils
en fondent de nouveaux, ils protègent les arts et les lettres dans
leurs formes traditionnelles.
De même dans la législation se conservaient les anciens
principes du droit kiévien, du « droit russe ». On peut le voir dans les
privilèges territoriaux accordés postérieurement aux ukrainiens et
blanc-russiens ou dans le statut Lithuanien de l’an 1529. On y
remarque que les anciennes coutumes de Kiev sont passées dans la
pratique judiciaire et administrative dans ces contrées fort éloignées
de la vieille capitale. Cela s’explique, entre autre, par la coutume
généralement suivie de ne nommer aux fonctions administratives
que des personnages ou boïards indigènes, qui conservaient
pieusement les usages de l’ancien droit. Dans quelques contrées la
coutume s’était même établie, que les familles seigneuriales du pays
avaient à remplir à tour de rôle, pendant une ou deux années, les
fonctions administratives les plus importantes.
Cet état de choses fut sérieusement ébranlé à l’avènement de
Vitovte. Après avoir obtenu de Iagaïl la reconnaissance de ses droits
sur le grand-duché, ce prince évinça les diverses dynasties locales
et plaça leurs domaines sous l’administration directe du pouvoir
central. Les gouverneurs qui remplacèrent les princes déjà assimilés
par l’élément local, ne se crurent pas obligés, après l’union de 1385,
de protéger ni l’église orthodoxe, ni les vieilles traditions kiéviennes.
Cependant il ne parut pas admissible de changer les anciennes
coutumes du pays ; c’est la raison des diverses chartes et privilèges,
qui furent octroyés pour en prévenir la violation. Les plus anciens
d’entre eux datent de l’abolition du pouvoir princier. Le pays retenait
une certaine autonomie et des fonctionnaires indigènes. De cette
façon les modifications dans la juridiction, l’administration et les
coutumes ne s’introduisirent que graduellement, surtout au premier
siècle, dans les états dépendant du grand-duché de Lithuanie.
Il en était autrement dans les contrées soumises à la couronne
de Pologne. Dès sa première occupation, Casimir avait pris à tâche
d’affaiblir le plus possible l’autorité des seigneurs et ses successeurs
continuèrent cette politique. On confisqua les terres des boïards, qui
s’étaient opposés à l’occupation et on les distribua, ainsi que toutes
celles qui se trouvaient à la disposition du roi, à des polonais ou à
des étrangers, sur la fidélité desquels le gouvernement pouvait
compter. Des colonies privilégiées furent établies dans les villes. Les
hautes fonctions administratives furent données à des étrangers.
Partout la langue latine et le feudalisme germano-polonais
s’introduisirent avant même d’être formellement sanctionnés par la
loi. Enfin on laissa vacantes les hautes charges ecclésiastiques,
dans l’intention d’y installer plus tard le clergé catholique et de
remplacer ainsi la religion orthodoxe par l’église de Rome.
L’assimilation des provinces ukrainiennes aux contrées
polonaises fut formellement consacrée, après la mort d’Iagaïl, par un
rescrit de 1434. Mais il fallut un siècle pour compléter l’abaissement
des classes supérieures ukrainiennes, supprimer leur civilisation et
la hiérarchie ecclésiastique. La vie nationale se conserva dans les
classes inférieures surtout parmi les artisans des villes, le bas clergé
et la petite noblesse. C’était évidemment un coup funeste, car,
depuis deux siècles, la Galicie et la Volhynie avaient été le foyer
principal de la civilisation ukrainienne.
De pareils exemples de la domination polonaise fournissaient
aux populations du grand-duché les meilleures raisons pour tenir à
leur existence séparée. Les seigneurs de l’ancienne dynastie
ukrainienne et blanc-russienne, ceux beaucoup plus nombreux de la
nouvelle dynastie lithuanienne, l’aristocratie, le clergé, les habitants
des villes, tous étaient prêts à soutenir quiconque voulait rompre une
lance contre les champions d’une union plus étroite avec la Pologne.
Les princes surtout — comme le frère d’Iagaïl, Svidrigaïl par
exemple — qui nourrissaient l’espoir d’assister à un retour aux
anciens principes de la politique lithuanienne, pouvaient compter sur
le concours efficace des populations slaves. L’aristocratie
lithuanienne prenait une attitude moins tranchée : elle ne souhaitait
ni l’incorporation complète à la Pologne, ni la rupture de l’union, car
l’union donnait dans le grand-duché une situation prépondérante à
l’élément lithuanien catholique sur l’élément orthodoxe blanc-russien
et ukrainien, qui désirait la séparation complète. Et comme les
aspirations expansives de la Pologne vers l’est étaient soutenues
par le pape et par les puissances catholiques, l’aristocratie
orthodoxe du grand-duché de Lithuanie se mit à chercher des amis
chez les Moscovites et chez les Moldaves.
XIII.
Incorporation des pays ukrainiens à la
Pologne. Progrès de la différenciation
des nationalités slaves orientales.
Forcé par la résistance qu’il rencontrait, d’abandonner pour le

moment, sans toutefois y renoncer, ses projets d’englober « les pays
lithuaniens et russes », le gouvernement polonais entreprit une tâche
plus facile, qui tendait au même but : incorporer tout au moins les
pays de l’ancien royaume de Galicie et de Volhynie. Déjà pendant la
guerre avec Lubarte, avant l’acte de 1385, la Pologne avait mis la
main sur la vieille principauté de Galicie, qui était devenue un
« palatinat russe », ainsi que quelques régions de la Volhynie
occidentale : les pays de Belze et de Cholm. A la mort de Vitovte (en
1430), elle plaça d’abord des garnisons dans les villes de Podolie et
essaya ensuite d’arracher par un coup de force la Volhynie à
Svidrigaïl, qui avait succédé à son cousin. Elle ne put y réussir
complètement, mais, d’après les conditions du traité de paix, elle
resta en possession de la partie occidentale de la Podolie, y compris
la ville de Kamenetz, tandis que la partie orientale avec les villes de
Braslav et de Vinnitza demeura au grand-duché.
Toutes les entreprises postérieures pour s’emparer de la Volhynie
n’eurent pas plus de succès. Il est vrai, qu’après la mort de
Svidrigaïl, le pays n’eut pas d’autres princes, mais il n’en conserva
pas moins une autonomie assez large. Il devint même un foyer
important de la vie ukrainienne, qui avait subi de si rudes atteintes
en Galicie, après que l’Ukraine orientale eut été ravagée à la fin du
XVe siècle par les hordes de la Crimée.
Vers le milieu du XVe siècle, les Khans de Crimée étaient
parvenus à s’affranchir de la vieille « horde d’or ». Devenus vassaux
de la Turquie, ils s’allièrent étroitement aux princes moscovites et,
sur les conseils de ces derniers, ils firent une série d’incursions dans
les états du grand-duché de Lithuanie, dont les régions du Dniéper
eurent principalement à souffrir. Ils les ravagèrent de telle sorte que
la population ukrainienne dut chercher asile dans la zone boisée de
la Kiévie et de la Volhynie. Durant plusieurs décades, la contrée au
sud et à l’est de Kiev resta vide, comme un désert. La Volhynie,
moins exposée aux attaques tartares et mieux défendue par son
aristocratie ukrainienne, demeura en quelque sorte au cours des XVe
et XVIe siècles, le centre intellectuel presque exclusif de l’Ukraine.
Mais son autorité politique était destinée à périr. La noblesse
polonaise profitant de la position précaire de la Lithuanie, assaillie de
deux côtés par les Moscovites et les hordes de Crimée, redoubla
ses attaques contre l’aristocratie lithuanienne pour parvenir sinon à
incorporer le grand-duché, tout au moins à se l’attacher par une
union plus étroite. A la diète, convoquée vers la fin de 1568, on usa
de tous les moyens pour atteindre ce but.
Le dernier descendant d’Iagaïl, le roi Sigismond-Auguste
employa toute son influence pour briser la résistance des
représentants du grand-duché. Ceux-ci s’étant retirés pour n’avoir
pas voulu céder, les polonais persuadèrent au roi de décréter, en sa
qualité de grand-duc de Lithuanie et en invoquant les droits
historiques de la Pologne, la réunion immédiate du palatinat de
Podliassie (c’est-à-dire la partie septentrionale du bassin du Bug,
avec Dorohytchyn, Bilsk et Melnik), ainsi que de la Volhynie et du
pays de Bratslav. En conséquence il fut mandé aux représentants de
ces pays d’avoir à venir siéger à la diète sous peine des plus
sévères sanctions. Après avoir tenté bien des échappatoires, les
députés n’osant pas encourir la disgrâce royale, se soumirent et
prêtèrent, quoique bien à contre-cœur, serment de fidélité à la
Pologne.
On souleva alors la question d’annexer également la Kiévie, et
comme les députés nouvellement assermentés avaient le plus grand
intérêt à ce que ce pays ne fût point séparé des leurs par une
frontière politique, on en vota immédiatement la réunion à la
Pologne. Voilà comment les terres de Kiev passèrent aux Polonais.
Cependant, effrayés de ce démembrement sans scrupule du
grand-duché, les représentants de la Lithuanie remirent de nouveau
la question sur le tapis à la même session de la diète, mais les
Polonais parvinrent à faire maintenir l’état de chose jugée. Le roi
octroya aux pays nouvellement réunis des privilèges, il promit de
reconnaître à l’aristocratie locale des droits égaux à ceux de la
noblesse polonaise pour l’obtention des fonctions publiques et
permit l’emploi dans l’administration de la langue indigène, qui s’était
formée, au siècle précédent, sous l’influence des dialectes blancs-
russiens et ukrainiens dans la pratique administrative du grand-
duché. Le droit codifié dans la nouvelle rédaction du « Statut
Lithuanien » de 1566 fut également maintenu.
Du reste, satisfaits de leur succès, les Polonais se montrèrent
plus accommodants eu égard à l’autonomie du grand-duché, qu’ils
venaient ainsi d’amputer : ils lui laissèrent ses ministres propres, sa
trésorerie et son armée. Mais, séparé de ses provinces
ukrainiennes, cet état perdit toute son importance et l’élément blanc-
russien, laissé à lui-même cessa de jouer un rôle. L’influence de la
politique, de la législation et de la civilisation polonaises s’étend sans
rencontrer d’obstacle sur tout le pays. De leur côté, les pays
ukrainiens, renfermés dans leur nouvelle frontière, se montrent
moins résistants aux envahissements de la Pologne. La diète
commune restera cependant le champ-clos, où se discuteront les
affaires d’intérêt général, les questions nationales et religieuses.
Au cours des derniers siècles, dont nous venons d’esquisser les
évènements, la ligne de démarcation entre les Blancs-Russes et les
Ukrainiens, ne s’accuse point encore, les liens entre ces deux
branches slaves sont resserrés par leur commune résistance, mais
nous voyons se creuser le fossé, qui les séparera à jamais des
Grands-Russes. Ces derniers restèrent, en effet, toujours sous la
domination et en contact immédiat des Tartares du bassin de la
Volga, tandis que l’occupation lithuanienne sauva du joug de la
Horde d’Or les Ukrainiens, qui plus tard eurent encore à lutter
opiniâtrement contre les « païens », représentés par les Tartares de
la Crimée et par les Turcs. En revanche, ils n’échappèrent pas à une
certaine dépendance du monde catholique, grâce à leurs relations
avec les Lithuaniens et les Polonais.
La rivalité politique entre la Lithuanie et la Moscovie engendra
des sentiments assez hostiles, qui les divisèrent définitivement. De
plus, la création d’une église métropolitaine spéciale pour les pays
ukrainiens et blanc-russiens, sous Vitovte, laquelle fut
immédiatement frappée de l’anathème par le métropolite de Moscou,
comme contraire aux règles canoniques, acheva cette séparation
dans le domaine intellectuel et religieux.
Dorénavant ces deux groupes suivront des voies différentes : la
Grande Russie se renfermera dans l’orthodoxie byzantine ; les
Blancs Russes et les Ukrainiens essaieront toujours de s’entendre
pour faire face aux prétentions de la Pologne et chercheront de
concert des exemples en occident pour lutter contre son
catholicisme. Nous sommes bien loin de la vie nationale slave
orientale, dont le foyer était à Kiev, dans le bassin du Dniéper.
Maintenant il y a trois centres et trois races : l’une se concentre
autour de Moscou, les deux autres de Vilna et de Lviv (Léopol),
quoique ces deux dernières restent encore unies intellectuellement
surtout à cause du danger polonais. Au cours des XVe et XVIe siècles,
elles paraissent tellement unifiées qu’on a peine à les distinguer
l’une de l’autre : la langue, formée dans la pratique administrative du
grand-duché leur est commune, les ouvrages littéraires et les
écrivains circulent du midi ukrainien au nord blanc-russien, sans qu’il
semble y avoir de frontière ethnographique. C’est qu’il n’y a pas,
dans toute cette période, de centre prépondérant bien distinct de la
vie intellectuelle et que par conséquent les traits nationaux ne nous
apparaissent pas de loin bien spécialisés.
C’est seulement au dix-septième siècle, que la vie nationale se
condensera à Kiev et que se manifestera décidément la nationalité
ukrainienne. Mais parmi les circonstances, qui amenèrent cette
démarcation d’avec les Blancs-Russes, il ne faut pas oublier l’acte
susdit de 1569, qui laissait ces derniers dans les domaines du
grand-duché de Lithuanie, tandis que les pays ukrainiens étaient
rattachés à la Pologne.
Toujours est-il que les trois nationalités des slaves orientaux sont
en train de se séparer définitivement et que leurs rapprochements
postérieurs, voire même leur vie commune sous un même sceptre,
n’effaceront jamais cette séparation.
XIV.
L’expansion polonaise en Ukraine.
Pendant les deux siècles, qui s’écoulèrent depuis l’acte de Krevo,

en 1385, jusqu’à ceux de Lublin en 1569, l’envahissement de l’église
catholique, de la colonisation, de la législation et de la civilisation
germano-polonaises [7] , produisit de grands changements dans
l’organisation des pays ayant appartenu auparavant au grand-duché
de Lithuanie.
[7] J’emploie à dessein ce double terme, parce que la
Pologne des XIVe et XVe siècles et même celle du XVIe et
du commencement du XVIIe siècle, bien qu’elle fût
politiquement en lutte contre l’invasion allemande, n’en
fut pas moins l’intermédiaire par lequel la civilisation, la
législation et la colonisation allemandes se répandirent
vers l’est. Les villes et les villages polonais furent
réorganisés sur les principes des lois de Saxe (droit de
Magdebourg) ; la colonisation allemande s’y établit (les
villes les plus importantes étaient allemandes sans en
excepter Cracovie et Léopol, surtout au XIVe siècle). Les
artistes et les artisans étaient des émigrés d’Allemagne,
des descendants d’émigrés ou étaient fournis par la
population juive germanisée. Aussi dans sa marche vers
l’orient la Pologne se sert-elle de cette organisation
germanique. Ce n’est qu’aux XVIe et XVIIe siècles que la
bourgeoisie commence à se poloniser et que les mœurs
polonaises prennent un caractère vraiment national.
Les princes de la famille d’Iagaïl et l’aristocratie catholique

lithuanienne, le nouveau clergé catholique, aussi bien que les
grandes colonies organisées dans les villes d’après le droit
allemand, tous avaient intérêt à ce que leur pays adoptât autant que
possible le régime de la Pologne, où la noblesse jouissait de grands
privilèges, où les colonies allemandes florissaient et où le clergé
catholique exerçait une influence sans bornes. Sans doute, à
l’époque des actes de Lublin les pays ukrainiens et blanc-russiens
avaient déjà senti l’ascendant de la législation et de la civilisation
polonaises, alors en pleine période de développement et il est
probable qu’avec le temps, ils l’auraient éprouvé davantage. Mais
l’incorporation directe, en 1569, fit tomber toutes les barrières, de
même qu’elle abolissait de droit toutes les restrictions qui frappaient
les citoyens polonais, résidant dans le grand-duché. Et cela eut des
conséquences considérables pour la vie même du pays.
Maintenant c’est au roi qu’il appartient de distribuer les terres et
de nommer aux emplois dans les pays de Volhynie, de Kiévie, de
Bratslav et au delà du Dniéper, sans qu’il ait à faire de distinctions
entre les Polonais et les indigènes. Il usera très largement de ce
droit, surtout en Ukraine orientale, car, en Volhynie et dans la zone
boisée de la Kiévie, il y avait une puissante classe de nobles locaux
déjà en possession, tandis que le reste de la Kiévie et les contrées
plus orientales avaient été dépeuplées par les dévastations tartares
à la fin du XVe et au commencement du XVIe siècle. Ce n’est que
dans la seconde moitié de ce siècle que la colonisation pourra
reprendre ici, grâce à l’organisation militaire des cosaques, qui
protégeront le pays contre les hordes. Des pays occidentaux
arriveront en foule les paysans ukrainiens, cherchant des terres
exemptes de servage et ils y constitueront la nouvelle population
agricole. Mais, à l’époque dont nous parlons, une grande partie des
terres étaient considérées comme sans maîtres, ou bien leurs
possesseurs étaient trop faibles pour pouvoir les disputer aux hauts
fonctionnaires ou aux magnats polonais, qui envoyaient leurs agents
s’en emparer en vertu d’un privilège octroyé par le roi.
Aussi après 1569, tous ces favorisés s’empressent-ils de se faire
allouer les terres dites « vacantes » et à se faire donner les emplois
administratifs et les domaines qui en dépendent. A défaut de
noblesse indigène les rois peuvent en investir des personnes
d’origine polonaise. De cette façon, dans le courant d’un demi-siècle,
cet immense pays très riche et très fertile qu’était l’Ukraine orientale,
se trouva aux mains des magnats polonais. C’est un nouveau
monde polonais qui se crée, où la noblesse emploie toute son
énergie à exploiter toutes les richesses naturelles et à faire rendre
son maximum au travail de la population. Cela joua un rôle
prépondérant dans la politique de la Pologne à la fin du XVIe et dans
la première moitié du XVIIe siècle.
De son côté, l’aristocratie ukrainienne — surtout en Volhynie, où
elle se trouvait la plus nombreuse — jalouse de jouir des privilèges,
qui lui avaient été accordés par l’acte de 1569, s’empressa de
s’adapter à la vie polonaise. Les grandes familles, les simples
nobles et même la bourgeoisie se hâtèrent de faire élever leurs
enfants dans les écoles polonaises pour qu’ils puissent y acquérir
les connaissances nécessaires aux carrières qui leur étaient
ouvertes par la nouvelle organisation. A cette époque les jésuites
établissaient leur renom d’éducateurs, aussi leurs écoles se
remplissent-elles de jeunes ukrainiens. Des collèges se fondent
même en Ukraine, pour accéder aux désirs des classes supérieures.
Une fois leurs études achevées, les jeunes nobles sont envoyés à la
cour du roi ou de quelque grand seigneur pour s’y faire aux belles
manières et nouer des amitiés, qui les pousseront dans leur carrière.
Pour les mêmes motifs, l’aristocratie ukrainienne cherche à
s’apparenter avec les grandes familles polonaises, ou appellent à
leur service, comme agents ou secrétaires, des petits nobles de
Pologne. En un mot ils se modèlent en tout et pour tout sur les cours
polonaises.
Dans les villes, grandes et petites, on introduisait l’organisation
germano-polonaise, quelque peu modifiée par la pratique locale, qui
mettait la direction municipale entre les mains des catholiques, ou
tout au moins leur assurait la prépondérance. On sait que ce droit
avait pour base le droit saxon (de Magdebourg), refondu dans une
nouvelle version par les juristes polonais au XVIe siècle et appliqué
dans la langue du pays. Ainsi sous l’influence de la pratique la vie
locale se polonisait.
Il faut ajouter que le gouvernement et les grands seigneurs
polonais faisaient tous leurs efforts pour propager dans les pays
nouvellement incorporés la religion catholique, bâtissant des églises
et des monastères pour légitimer en quelque sorte devant leur
conscience les violences qu’ils commettaient en son nom. Car, c’est
à cette époque de violente réaction catholique, que le roi Sigismond
III Vasa, élève des jésuites et entièrement dévoué à leur cause,
employait tous les moyens pour convertir la population orthodoxe ou
tout au moins pour réunir les deux églises.
N’oublions pas non plus que c’était alors l’âge d’or de la
civilisation polonaise. Le mouvement de la réforme lui insufflait une
énergie créatrice, qui se manifesta, en particulier, dans
l’épanouissement d’une littérature, aux traits pleins de noblesse, ce
qui ne contribua pas le moins à lui attirer les sympathies de
l’aristocratie dans les pays nouvellement incorporés.
On comprendra donc facilement le changement rapide d’aspect
que subit l’Ukraine centrale et orientale au cours du demi-siècle, qui
suivit les actes de 1569. Elle était menacée de ce qui était arrivé à
l’Ukraine occidentale deux siècles auparavant.
Les mœurs des hautes classes, l’administration, la législation, la
vie intellectuelle se polonisent très vite. Les grands emplois, la
propriété, l’administration des villes se trouvent entre les mains de
l’élément polonais ou polonisé, qui inonde le pays de ses agents et
d’israélites. Ces derniers manifestent surtout leurs qualités en tant
que fermiers des impôts ou monopoles sur les boissons
spiritueuses, les douanes, les moulins, etc. Les grandes familles —
comme les Ostrogsky, les Vichnevtsky, les Khodkevitch, etc. — qui
étaient naguère les plus fermes soutiens de la vie nationale et de
l’église orthodoxe, se montrent maintenant les protecteurs du
catholicisme et de la polonisation. Le rôle de religion d’état est
dévolu à l’église catholique et à l’église uniate, tandis que les
orthodoxes sont exposés aux persécutions qui frappent les
« dissidents ». La vie nationale ukrainienne est refoulée dans les
classes inférieures, que les Polonais ont placées sous un régime
insupportable.
XV.
Modifications sociales apportées par
le régime polonais.
Résumons brièvement les transformations apportées par la

législation et la pratique polonaise dans l’organisation sociale de nos
pays.
La haute aristocratie ukrainienne, qui tenait auparavant le
gouvernement, perd la plus grande partie de ses privilèges et tombe
au rang de petite noblesse. Malgré toutes les promesses, elle perd
chaque jour de son importance sociale et elle finira par disparaître
complètement. A cet affaissement de la haute aristocratie
correspond un renforcement de la petite noblesse polonaise ou
polonisée. Elle est exemptée d’impôts, du service militaire et de
presque toutes autres obligations. Déjà elle avait obtenu les droits
les plus larges : elle nomme aux emplois, tranche les affaires locales
à ses petites diètes et décrète à la diète générale des lois qui
favorisent avant tout ses intérêts. Le pouvoir royal et en général tout
pouvoir public était réduit au minimum ; la noblesse était jalouse de
n’être contrainte par aucune restriction : se faire rendre justice contre
un noble était chose impossible surtout pour un roturier. Quant aux
sujets, ils ne pouvaient porter plainte contre leur seigneur.

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Prentice Halls Federal Taxation 2015

Corporations Partnerships Estates and

1) A partnership cannot recognize a gain or loss on a current distribution.

7) A partner can recognize gain, but not loss, on a liquidating distribution.

Cash deemed distributed $10,000

The new basis of Diane's partnership interest is zero.

22) Identify which of the following statements is true.

*$3,000 ÷ ($3,000 + $5,000) × 2,000 = 750

[$9,000/($9,000 + $6,000)] × $10,000 = $6,000

× $12,000 = $8,000 basis for building*

Page Ref.: C:10-6

28) Identify which of the following statements is true.

29) Identify which of the following statements is true.

34) The definition of "inventory" for purposes of Sec. 751 includes

36) What is the definition of "substantially appreciated inventory"?

The indication that ABC owns substantially appreciated inventory is

(1) FMV of receivables and inventory [0.20 × ($10,000 + $30,000)] $8,000

40) Identify which of the following statements is true.

Parcel One Parcel Two Total

*$5,000 ÷ ($5,000 + $12,000) × 7,000 = 2,059

46) Identify which of the following statements is true.

47) Identify which of the following statements is false.

50) Identify which of the following statements is true.

53) Identify which of the following statements is true.

54) If a partner dies, his or her tax year closes

57) A partnership terminates for federal income tax purposes if

58) Identify which of the following statements is true.

Assets Basis FMV

65) Which of the following statements is correct?

68) When must a partnership make mandatory basis adjustments?

69) Identify which of the following statements is true.

Predistribution basis $53,000

Minus: FMV of distribution other than cash ( 52,000)

Cara's predistribution basis $28,000

Minus: cash distribution ( 30,000)

No income is recognized as a result of the cash distribution.

Assets Basis Fair Market Value

Assets Basis Fair Market Value

Equities Basis Fair Market Value

Predistribution basis in DPQ $70,000

Assets Basis Fair Market Value

Equities Basis Fair Market Value

Total received ($28,000 + $6,000) $34,000

Analysis of the Sec. 736(b) payment of $33,000.

Predistribution basis in partnership $18,000

Assets Basis Fair Market Value

Equities Basis Fair Market Value

Realized and recognized gain = $87,000 - $17,000 = $70,000.

Assets Basis Fair Market Value

Equities Basis Fair Market Value

Assets Basis Fair Market Value

Assets Basis Fair Market Value

Assets Basis Fair Market Value

91) What is included in the definition of unrealized receivables?

92) Do most distributions made by a partnership require a Sec. 751 calculation?

Assets Basis FMV

Rod should consider: