On January 1 of Year One, Nupartner purchased a one-third interest in a partnership for $40,000. At the time of the purchase, the partnership had the following assets:

	Adjusted Base	Fair Market Value
Account Receivable	0	30,000
Land	60,000	90,000

a. If section 754 had not been elected by the partnership, what result to Nupartner upon the collection of the receivables?

b. What result to Nupartner in (a), above, if the partnership had made a section 754 election?

c. Who makes the section 754 election? When and how must the election be made?

d. Will Nupartner’s purchase and the section 754 election have any immediate tax impact on the remaining old partners?

e. Will the section 743(b) basis adjustment affect Nupartner in situations other than on collection of partnership income or sales of partnership property?

f. At the end of Year Three, the partnership had earnings, all of which had been distributed, and it continued to hold the identical accounts receivable and land, each of which had the same basis and fair market value. Assuming no section 754 election, what result to Nupartner if, before the receivables are collected, he sells his partnership interest to Buyer for $40,000?

g. What result to Nupartner in (f) above if the partnership had made a section 754 election?

h. What is Buyer’s inside basis in (g) above?

i. If the partnership properly maintained capital accounts and the selling partner’s capital account prior to the sale of his interest was $20,000, what is Nupartner’s capital account upon purchase of his one-third interest for $40,000

if: i. a section 754 election were in effect

ii. a section 754 election were not in effect.

Answer rating: 100% (QA)

a If section 754 had not been elected by the partnership what result to Nupartner upon the collection of the receivables ANSWER Nupartner would recognize 10000 of gain on the collection of the receiva... View the full answer