BPA Partnership Is an Equal Partnership in Which Each of the Partners

question 22

Essay

BPA Partnership is an equal partnership in which each of the partners has a basis in her partnership interest of $20,000. BPA reports the following balance sheet: $\begin{array}{l}\begin{array}{c}\\Inventory\\Land\\Total\\\end{array}\begin{array}{c}\text { Basis } \\\$ \mathbf{4 0 , 0 0 0} \\\underline{\mathbf{2 0 , 0 0 0}} \\\$ \mathbf{6 0 , 0 0 0} \\\hline\end{array}\begin{array}{c}{\text { FMV }}\\{\$ 60,000} \\\underline{\mathbf{3 0 , 0 0 0}} \\\hline \mathbf{9 0 , 0 0 0} \\\end{array}\end{array}$

Brooke, capital $\quad\quad\$20,000$
Penelope, capital $\quad\quad20,000$
Amanda, capital $\quad\quad\underline{20,000}$
Total $\quad\quad\quad\quad\quad\quad\$60,000$ a. Identify the hot assets if Brooke decides to sell her interest in BPA.
b. Are these assets "hot" for purposes of distributions?

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Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds, represented as the interest payable on any type of debt.

Dividend Yield

A financial ratio that indicates how much a company pays out in dividends each year relative to its stock price.

Return on Stockholders' Equity

A measure of the profitability of a corporation in terms of the equity held by its shareholders, indicating how efficiently a company uses its equity base to generate profit.

Net Income

The total profit of a company after all revenues and gains are added together and all expenses and losses are subtracted.