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The SLD Partnership distributes the following property to Swindler in a distribution that liquidates Swindler’s interest in the partnership
- The SLD Partnership distributes the following property to Swindler in a distribution that liquidates Swindler’s interest in the partnership. Assume that no Sec. 754 election is in effect. Swindler’s basis in his partnership interest before the distribution is $69,000. The adjusted bases and FMVs of the distributed property to the partnership before the distribution are as follows:
|
Assets |
Basis |
FMV |
|
Cash |
$5,000 |
$5,000 |
|
Inventory |
16,000 |
18,000 |
|
Capital Asset 1 |
20,000 |
30,000 |
|
Capital Asset 2 |
40,000 |
35,000 |
|
Total |
81,000 |
88,000 |
Determine Swindler’s basis in each distributed asset. Show computations for full credit
Expert Solution
Calculation of Swindler's basis in each distributed asset
First of all, we have to find percentage of share of Swindler in SLD Partnership
% of share of Swindler = 69,000/81,000*100 = 85.19%
Calculation of Swindler's Basis in each distributed asset
| Asset | Swindler's Share |
| Cash | $5,000*.8519 = $4,259.5 |
| Inventory | $16,000*.8519 = $13,630.4 |
| Capital asset 1 | $20,000*.8519 = $17,038 |
| Capital asset 2 | $40,000*.8519 = $34,072 |
| 69,0000 (approx) |
Calculation of Swindler's Basis in each distributed asset on basis of FMV
| Asset | Swindler's Share |
| Cash | $5,000*.8519 = $4,259.5 |
| Inventory | $18,000*.8519 = $15,334.2 |
| Capital asset 1 | $30,000*.8519 = $25,557 |
| Capital asset 2 | $35,000*.8519 = $29,816.5 |
| = $74,967.2 |
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