Do not give answer in image A, B and C are equal partners in the ABC partnership. On January 1", 2000, A's outside basis is$250 and ABC's balance sheet (including FMVS) is as follows:AssetsAB/240759055CashA/C RecInv.MachineryBuildingStockGoodwillTotal200900750FMV240601501005003003001650ABCTotalLiabilities & CapitalLiabilities150Capital AccountsTax200200200600FMV5005005001500What are the tax consequences to A if A were to sell her interest to P for $500 cash?Assume that ABC purchased the machine three years ago $120, and that $120 in depreciation has beentaken on the building since its acquisition five years ago.

Liabilities: When a third party buys a partnership interest, the buyer generally assumes the selling…

What are the tax consequences to A if A were to sell her interest to P for $500 cash? Assume that ABC purchased the machine three years ago $120, and that $120 in depreciation has been taken on the building since its acquisition five years ago.

What are the tax consequences to A if A were to sell her interest to P for $500 cash? Assume that ABC purchased the machine three years ago $120, and that $120 in depreciation has been taken on the building since its acquisition five years ago.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

Do not give answer in image

A, B and C are equal partners in the ABC partnership. On January 1", 2000, A's outside basis is
$250 and ABC's balance sheet (including FMVS) is as follows:
Assets
AB/
240
75
90
55
Cash
A/C Rec
Inv.
Machinery
Building
Stock
Goodwill
Total
200
90
0
750
FMV
240
60
150
100
500
300
300
1650
A
B
C
Total
Liabilities & Capital
Liabilities
150
Capital Accounts
Tax
200
200
200
600
FMV
500
500
500
1500
What are the tax consequences to A if A were to sell her interest to P for $500 cash?
Assume that ABC purchased the machine three years ago $120, and that $120 in depreciation has been
taken on the building since its acquisition five years ago.

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