Partnership taxation - Assignment Example

PARTNERSHIP TAXATION: Federal Taxation of Partnerships I (a). What are the tax consequences to A, B & C and the partnership from these contributions? Include in your response:Any income/loss recognition by partners and partnershipWhat each partners outside basis will be andWhat the partnerships inside basis will be in each assetAnswersA, B, C are of equal partnership in ABC. A Pays $50,000 cash, B pays equipment with a basis of $15,000 and a FMV of $30,000 and C pays land with a basis of $25,000 and a FMV of $35,000.

Soon after contributions, Balance Sheet would display the following with an assumption that ABC has zero liabilities at the time it is formed: All Assets basis 90,000 dollars and it shows the contributed assets in the partnerships ownership. This is inside basis of ABC partnerships. All Assets Value add up to 115,000 dollars and this signifies partnership assets book value.The entire Basis is 90,000 dollars and this signifies the tax capital accounts of partners outside basis of contributed properties.

Entire book capital adds up to $115,000 and this denotes that the book capital account of partners. Book capital accounts mirror partners’ equal rights and contributions to every liquidation distributions (Larson, 2013)IncreasesEvery partner external basis will beA-$20000B-$5000C-$10000Entire partners’ external basis is $35000 Partners inside basis in every assetCash-$20000 Inventory-$5000Office furniture-$10000(b). what are A, B and C’s holding periods in their partnership interests?Answer A: B: C=20:5:10That means that the holding period should be according to the way they share their interest.

Therefore, the holding periods for A, B and C will be 4, 1 and 2 respectively.2. Which of the items must be separately stated by the partnership?AnswerTax exempted interestDividend incomeGain from the sale of equipment-sec 1231 gain3-False as payment is not only made for prior year but for other years a sum of 500 dollars or less must be made.4-True as It is a cost related to the investment. 5-True As a single owned organization is majorly a sole proprietorship and can only be classified to be a different entity from the owner or can be taxed as an association.

6-False As is it is always due by April 15th provided the k1 form is submitted by march 15th ReferenceJoni, Larson (2013). Partnership Taxation: An Application Approach. Carolina Academic Press, 2013 - Law - 454 pages