QUESTION 1 The LMN Partnership has the following assets and liabilities before any reduction for yea

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QUESTION 1

The LMN Partnership has the following assets and liabilities before any reduction for year-end principal payments on the liabilities Assume the book basis and tax basis are the same amount

Description Basis Value

Assests $300,00 $400,000

Nonrecourse debt $ 500,00 $ 500,00

If the partners have a deficit in their capital accounts of ($100,000), what is the amount of minimum gain chargeback if partnership taxable loss for the year is ($20,000) and the liabilities are reduced by $250,000 to $350,000?

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A

$0

B

$20,000

C

$50,000

D

$100,000

QUESTION 2

H’s $30,000 partnership interest is terminated through a capital asset distribution having a fair market value of $50,000 (partnership basis of $40,000) and cash of $10,000 Assuming that an optional basis adjustment election is in effect, which of the following statements is true?

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A

H’s basis in the capital asset is $20,000

B

H does not recognize gain or loss and takes a $30,000 basis in the capital asset received

C

H recognizes a gain of $30,000

D

The partnership increases the basis of its remaining assets by $30,000

 
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