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

question 24

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:
$$\begin{array} { | l | r | r | } \hline & \text { Basis } & \text { FMV } \\\hline \text { Inventory } & \$ 40,000 & \$ 60,000 \\\hline \text { Land } & \underline { 20,000 } & \underline { 30,000 } \\\hline \text { Total } & \$ 60,000 & \$ 90,000 \\\hline\end{array}$$ a. Identify the hot assets if Brooke decides to sell her interest in BPA.
b. Are these assets "hot" for purposes of distributions?
c. If BPA distributes the land to Brooke in complete liquidation of her partnership interest, what tax issues should be considered?
$$\begin{array} { | l | r | } \hline \text { Brooke, capital } & \$ 20,000 \\\hline \text { Penelope, capital } & 20,000 \\\hline \text { Amanda, capital } & \underline { 20,000 } \\\hline \text { Total } & \$ 60,000 \\\hline\end{array}$$

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Definitions:

Equal Payments

A series of payments that are the same in amount, typically made at regular intervals over a specified period of time.

Focal Date

The date selected for the calculation of equivalent values.

Compounded Annually

Definition: Refers to the calculation and addition of interest to the principal sum of a loan or deposit once every year.

Debt

money that is owed or due to be paid to someone else, often as a result of borrowing funds.