Partnership Tax Return

California State University, San Bernardino (CSUSB) Department of Accounting and Finance

ACCT 527/436/536

Instructor: John R. Dorocak, J.D., LL.M. (Tax), C.P.A.

PARTNERSHIP PROBLEMS

1. Alice and Bob each receive a 50% interest in a general partnership in exchange for the following capital contributions.

Alice Bob

Cash $25,000 FMV Basis

Land $100,000 $85,000

The land is subject to $75,000 recourse mortgage that is assumed by the partnership at the date of Bob(s contribution.

a. How much gain/loss is recognized by each partner and the partnership at the date of the partnership formation?

b. What is each partner(s beginning tax basis in his partnership capital account?

c. Set up the partnership(s beginning tax basis and FMV balance sheet.

d. Determine each partner(s beginning tax basis in his partnership interest.

e. What if the liabilities on Bob(s property = 175,000 and FMV = 200,000 - answer A through D

2. The Beer & Pretzels Partnership is a limited partnership with three partners, Woody, Sam and Nora. Woody and Sam are general partners; Nora is a limited partner. The partnership agreement provides for the following allocation of profits & losses.,

Woody Sam Nora

Profit-sharing 20% 20% 60%

Loss-sharing 30% 30% 40%

The partnership reports the following liabilities at 12/31.

Nonrecourse $50,000

Recourse 10,000

How are the liabilities allocated to the partners for purposes of calculating their tax bases in their partnership interests?