Adam, Brett, and Cam own ABC, Ltd. an equal tax partnership. On January 1 of the tax year, Adam's outside basis is $170,000 and the partnership's balance sheet is as follows (basis and book values are combined and a column is added to include fair market values): 

A. Determine the amount and character of all the potential gains within the partnership as well as Adam’s share of these gains (assuming he were to remain in the partnership through the disposition of all the assets).

B. What would be the tax consequences if Adam received the accounts receivable and Land #1 in complete liquidation of his interest in the partnership?

C. In part (B) Adam received the accounts receivable and Land #1 in complete liquidation of his interest in the partnership which resulted in him taking ordinary property (A/R) with zero basis. Can you think of a different way to handle this liquidation to improve Adam’s tax result while still disposing of the A/R and Land #1?

D. What would be the tax consequences if, in complete liquidation of his interest in the partnership, Adam received, in the alternative, (i) the accounts receivable and Land #2, (ii) one half of the inventory and all of Land #1, (iii) one-third of both the inventory and accounts receivables and all of Land #2, or (iv) The accounts receivable and a one-half interest in both Land #1 and Land #2?

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Cash Acct. Receivable Inventory Land #1 Land #2 Stock ** Total Assets: Tax Basis/Book $120,000 SO $30,000 $180. $90,000 $90,000 $510,000 ABC Ltd. Balance Sheet - January 1st Liabilities: FMV $120,000 $30,000 $60,000 $120,000 $120,000 $150.000 $600,000 Adam Brett Cam Total $150,000 Capital Accounts/Equity FMV $150,000 $150,000 $150,000 $450,000 Tax/Book $120,000 $120,000 $120,000 $360,000 **The stock is a non-marketable security that is not traded on any public exchange. Cash Acct. Receivable Inventory Land #1 Land #2 Stock ** Total Assets: Tax Basis/Book $120,000 SO $30,000 $180. $90,000 $90,000 $510,000 ABC Ltd. Balance Sheet - January 1st Liabilities: FMV $120,000 $30,000 $60,000 $120,000 $120,000 $150.000 $600,000 Adam Brett Cam Total $150,000 Capital Accounts/Equity FMV $150,000 $150,000 $150,000 $450,000 Tax/Book $120,000 $120,000 $120,000 $360,000 **The stock is a non-marketable security that is not traded on any public exchange.

Answer rating: 100% (QA)

To address each of the questions we need to evaluate the partnerships balance sheet and its assets tax basis and fair market value FMV along with Adams outside basis in the partnership Lets deal with ... View the full answer