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Partnership Taxation: Establishing Initial Book and Tax Cap

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by

Cass Brewer

on 18 August 2014

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Transcript of Partnership Taxation: Establishing Initial Book and Tax Cap

Partnership Taxation: Establishing Initial Book and Tax Capital Accounts
Refer to LSK Booklet Ch. 2 Problem 2
Click Here If You Need to Review Facts and Formation Tax Analysis:
http://prezi.com/oedim66vhfw4/lsk-ch-2-problem-2/

Basic Facts LSK Ch. 2 Prob. 2
DEF Partnership

D contributes land with
FMV = $400 subject to
$240 mortgage plus
$40 in cash. AB in
land = $100.

Partner F contributes $350
in accounts receivable with
$0 AB and $150 account
payable for net FMV of
$200 contributed. F's
AB in accounts receivable
= $0.
Process
Partnership’s Assets (Book) = Liabilities + Book Capital.
Partner’s Book Capital = FMV Property Contributed – Total (Not Net) Liability Relief.
Partner’s Tax Capital = Partner’s Contribution to Inside Basis – Partner’s Total (Not Net) Liability Relief.
Inside Basis = Aggregate Outside Basis (Unless Special Exceptions Apply).

Results
Partner D
+ AB Prop Contributed = $100
+ AB Prop Contributed = $40
-- Liability Relief = ($240)
+ 752 Share of Liability = $80
+ 752 Share of Liability = $20
TOTAL Outside AB = $0
Partner E
E contributes building with FMV = $260 subject to $60 mortgage with AB = $130.
+ AB Prop Contributed = $130
-- Liability Relief = ($60)
+ 752 Share of Liability = $80
+ 752 Share of Liability = $20
TOTAL Outside AB = $170
Partner F
+ AB Prop Contributed = $0
-- Liability Relief = ($0)
+ 752 Share of Liability = $80
+ 752 Share of Liability = $20
TOTAL Outside AB = $100
Tutorial
Template on TWEN
Full transcript