In 2022, Sean Caldwell decided to sell his 35% interest in capital and profits of Boscelli Partnership to Ryan Peters for $31,000. At the time of the sale, Sean's basis in the partnership interest was $21,875.  

 

In a short document, share your calculations. Write what you have determined to be the impact of the election on the basis of each asset. Briefly describe (in one or two sentences) why this basis adjustment exists (i.e., what is its purpose). State why a partnership might choose not to have the election in effect.

In 2021, Sean Caldwell decided to sell his 35% interest in capital and profits of Boscelli
Partnership to Ryan Peters for $31,000. At the time of the sale, Sean's basis in the partnership
interest was $21,875.
At the time of the sale, the partnership's books appeared as follows:
Assets Basis Fair Market Value
Cash $15,000 $15,000
Receivables 0 $12,500
Inventory $25,000 $28,000
Machinery $17,500 $25,000
Real Estate $5,000 $19,500
Liabilities & Capital Accounts
Capital Account-Sean $21,875 $35,000
Capital Account-other $40,625 $65,000
If the real estate or machinery would have been sold at that time, all of the gain would be
characterized as Sec. 1231 or capital.
The partnership had a valid Sec. 754 election in effect at the time of the sale.

This resource shows the partnership's books at the time of the sale.

 

show calculations for each part in Excel and a ½ to 1pg single spaced Word document

Answer rating: 100% (QA)

Calculations 1 Basis Adjustment Calculation Proceeds from the sale 31000 Seans original basis in the ... View the full answer