Kara owns 35% of the KLM Partnership and 45% of the KTV Partnership. Lynn owns 20% of KLM and 3% of KTV. Maura, Kara’s daughter, owns 15% of KTV. No other partners own an interest in both partnerships or are related to other partners. The KTV Partnership sells to the KLM Partnership 1,000 shares of stock, which KTV has held for investment purposes, for its $50,000 FMV. What are the tax consequences of the sale in each of the following independent situations?
a. KTV’s basis for the stock is $80,000.
b. KTV’s basis for the stock is $23,000 and KLM holds the stock as an investment.
c. KTV’s basis for the stock is $35,000 and KLM holds the stock as inventory.
d. What are the tax consequences in Part a if the KLM Partnership subsequently sells the stock to an unrelated third party for $130,000? For $70,000? For $40,000?