The operating expenses include a $1,800 trucking fine that one of its drivers incurred for reckless driving and speeding and meals expense of $6,000 (the meals were not provided by a restaurant). By the end of 2022, Reed has had a falling out with Carrie and Doug and has decided to leave the partnership. He has located a potential buyer for his partnership interest, Indie Ruff. Indie has agreed to purchase Reed's interest in Slicenhook for $730,000 in cash and the assumption of Reed's share of Slicenhook's debt. Carrie and Doug, however, are not certain that admitting Indie to the partnership is such a good idea. They want to consider having Slicenhook liquidate Reed's interest on January 1, 2023. As of January 1, 2023, Slicenhook has the following assets:
The operating expenses include a $1,800 trucking fine that one of its drivers incurred for reckless driving and speeding and meals expense of $6,000 (the meals were not provided by a restaurant). By the end of 2022, Reed has had a falling out with Carrie and Doug and has decided to leave the partnership. He has located a potential buyer for his partnership interest, Indie Ruff. Indie has agreed to purchase Reed's interest in Slicenhook for $730,000 in cash and the assumption of Reed's share of Slicenhook's debt. Carrie and Doug, however, are not certain that admitting Indie to the partnership is such a good idea. They want to consider having Slicenhook liquidate Reed's interest on January 1, 2023. As of January 1, 2023, Slicenhook has the following assets:
Chapter12: Nonrecognition Transactions
Section: Chapter Questions
Problem 59DC
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Transcribed Image Text:The operating expenses include a $1,800 trucking fine that one of its drivers incurred for reckless
driving and speeding and meals expense of $6,000 (the meals were not provided by a restaurant).
By the end of 2022, Reed has had a falling out with Carrie and Doug and has decided to leave the
partnership. He has located a potential buyer for his partnership interest, Indie Ruff. Indie has agreed
to purchase Reed's interest in Slicenhook for $730,000 in cash and the assumption of Reed's share
of Slicenhook's debt. Carrie and Doug, however, are not certain that admitting Indie to the partnership
is such a good idea. They want to consider having Slicenhook liquidate Reed's interest on January 1,
2023. As of January 1, 2023, Slicenhook has the following assets:
Cash
Investment-tax exempts
Investment stock
Equipment-net of depreciation
Building-net of depreciation
Land
Total
Cash
Investment stock
Carrie and Doug propose that Slicenhook distribute the following to Reed in complete liquidation of
his partnership interest:
Equipment-$200,000 cost, net of
depreciation
Tax Basis
$ 876,800
15,000
45,000
333,000
1,146,000
460,000
$ 2,875,800
Total
FMV
$ 876,800
18,000
45,000
600,000
1,440,000
510,000
$ 3,489,800
Tax Basis
$ 485,000
45,000
111,000
$ 641,000
FMV
$ 485,000
45,000
200,000
$ 730,000
Transcribed Image Text:Slicenhook has not purchased or sold any equipment since its original purchase just after formation.
h-1. If Reed sells his interest in Slicenhook to Indie Ruff, what is Indie's inside basis in Slicenhook?
h-2. What effect would a §754 election have on Indie's inside basis?
Complete this question by entering your answers in the tabs below.
Req H1
Req H2
If Reed sells his interest in Slicenhook to Indie Ruff, what is Indie's inside basis in Slicenhook?
Indie's inside basis
Show Transcribed Text
h-1. If Reed sells his interest in Slicenhook to Indie Ruff, what is Indie's inside basis in Slicenhook?
h-2. What effect would a §754 election have on Indie's inside basis?
Req H1
Complete this question by entering your answers in the tabs below.
U
Req H2
What effect would a §754 election have on Indie's inside basis?
Special basis adjustment
Increase
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