Michael and Tyler are equal partners in the MT Partnership. They formed the partnership three years earlier. The partnership uses the accrual method of accounting and all of the assets were purchased by the partnership. At the end of the year, Michael sells his partnership interest to Christian for $42,000 cash + assumption of Michael’s share of the partnership debt. The partnership’s tax balance sheet at the time of the sale is below. What are the tax consequences to Michael on the sale? Assuming the MT Partnership has made a section 754 election, what is the amount of the section 743(b) basis adjustment for Christian? What is Christian’s basis in his partnership interest and capital accounts? FMV Book Tax Book Tax Cash 15,000 15,000 15,000 NR Debt 6,000 6,000 A/R 30,000 30,000 30,000 Inventory 30,000 18,000 18,000 Michael 45,000 45,000 Stock 15,000 33,000 33,000 Tyler 45,000 45,000 Total 90,000 96,000 96,000 96,000 96,000
Michael and Tyler are equal partners in the MT
What are the tax consequences to Michael on the sale?
Assuming the MT Partnership has made a section 754 election, what is the amount of the section 743(b) basis adjustment for Christian? What is Christian’s basis in his partnership interest and capital accounts?
|
FMV |
Book |
Tax |
Book |
Tax |
||
|
Cash |
15,000 |
15,000 |
15,000 |
NR Debt |
6,000 |
6,000 |
|
A/R |
30,000 |
30,000 |
30,000 |
|||
|
Inventory |
30,000 |
18,000 |
18,000 |
Michael |
45,000 |
45,000 |
|
Stock |
15,000 |
33,000 |
33,000 |
Tyler |
45,000 |
45,000 |
|
Total |
90,000 |
96,000 |
96,000 |
96,000 |
96,000 |
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