Multiple choice
1. Lara owns a 60 percent interest and Lance owns a 40 percent interest in LL Partnership, a general partnership. On January 1, 2011, Lara’s adjusted basis in her partnership interest was $60,000 and Lance’s adjusted basis for his partnership interest was $10,000. During 2011, LL Partnership had net taxable ordinary income of $50,000 and the following separately stated items: qualified dividend income of $1,000; taxable interest income of $2,600; charitable contributions of $3,000; and Section 179 expense of $20,000. During 2011, partnership liabilities decreased by $25,000 and there were no distributions made to either partner (assume liabilities are allocated in proportion to their percentage ownership of the partnership). Which of the following correctly states the basis in each partner’s interest in LL Partnership on December 31, 2011?
A. Lara: $63,360 and Lance: $12,240.
B. Lara: $65,520 and Lance: $12,680.
C. Lara: $90,360 and Lance: $30,240.
D. Lara: $92,160 and Lance: $31,440.
2. Ten years ago, Lisa acquired a one-third interest in Dee Associates, a general partnership. In the current taxable year, when Lisa’s entire interest in the partnership was liquidated, Dee Associates’ assets consisted of cash of $20,000 and tangible property with an adjusted basis to the partnership of $46,000 and a fair market value of $40,000 on the date of distribution. Dee Associates had no liabilities. Lisa’s adjusted basis in her one-third interest in the partnership was $22,000. Lisa received cash of $20,000 in complete liquidation of her entire interest. How much loss will Lisa recognize upon receipt of the liquidating distribution?
A. 0.
B. $2,000 short-term capital loss.
C. $2,000 long-term capital loss.
D. $2,000 ordinary loss.
3. Mark, Pete and Mickey are equal partners in the 2MP Partnership, a general partnership. On January 1, 2011, Mark’s adjusted basis in his partnership interest was $15,000, Pete’s adjusted basis in his partnership interest was $10,000, and Mickey’s adjusted basis in his partnership interest was $20,000. The partnership had taxable income of $30,000 in 2011 which was allocated equally among the partners. On December 31, 2011, the partnership made a non-liquidating distribution of $25,000 cash to Pete. How much income or gain did Pete recognize as a result of the distribution?
A. 0.
B. $5,000.
C. $15,000.
D. $25,000.
4. Ellen is a 25 percent partner in EFGH Partners, a general partnership. Ellen’s adjusted basis in her partnership interest is $18,000. During the current taxable year, Ellen received a non-liquidating distribution of land from EFGH Partners that had an adjusted basis to the partnership of $23,000 and a fair market value of $45,000 on the date of distribution. What is Ellen’s basis in the land received in the non-liquidating distribution?
A. 0.
B. $18,000.
C. $23,000.
D. $45,000.
