Dispositions of Partnership Interests and Partnership Distributions

16399 WordsFeb 4, 201366 Pages
Chapter 10 Dispositions of Partnership Interests and Partnership Distributions SOLUTIONS MANUAL Discussion Questions 1. [LO 1] Joey is a 25% owner of Loopy LLC. He no longer wants to be involved in the business. What options does Joey have to exit the business? Answer: Joey’s two most common options are to sell or exchange his interest in the LLC to a third party or to have the LLC liquidate his interest. Joey may also exchange his interest for corporate stock, give the interest away, or transfer the interest upon his death. 2. [LO 1] Compare and contrast the aggregate and entity approaches for a sale of a partnership interest. Answer: Under the aggregate approach, the disposition of a partnership…show more content…
8. [LO 1] Can a partnership have unrealized receivables if it has no accounts receivable? Answer: The definition of unrealized receivables is broad enough to encompass assets other than accounts receivable. §751(a) also includes assets that are NOT capital assets or §1231 assets that would produce ordinary income if sold by the partnership. Items such as depreciation recapture are also classified as unrealized receivables. Thus, a partnership can have unrealized receivables without having accounts receivable. 9. [LO 1] How do hot assets affect the character of gain or loss on the sale of a partnership interest? Answer: Hot assets cause a portion of the gain or loss on the sale of a partnership interest to be classified as ordinary rather than capital. 10. [LO 1] Under what circumstances can a partner recognize both gain and loss on the sale of a partnership interest? Answer: A partner may recognize both gain and loss on the sale of a partnership interest in the situation where a partner’s share of the unrealized gain in hot assets is greater than his total gain or loss on the sale of his partnership interest. 11. [LO 1] Absent any special elections, what effect does a sale of partnership interest have on the partnership? Answer: When one partner sells his partnership interest, the sale
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