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

question 87

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: $$\begin{array} { | l | r | } \hline \text { Nadine, capital } & \$ 50,000 \\\hline \text { Louis, capital } & 50,000 \\\text { Total } & \$ 100,000 \\\hline\end{array}$$ $$\begin{array} { | l | r | r | } \hline & \text { Basis } & \text { FMV } \\\hline \text { Cash } & \$ 60,000 & \$ 60,000 \\\hline \text { Capital asset (nondepreciable) } & \underline { 120,000 } & \underline { 240,000 } \\\hline \text { Total } & \$ 180,000 & \$ 300,000 \\\hline\end{array}$$ 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?

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Definitions:

Craft Union

Labor union whose members all have a particular skill or occupation.

Bargaining Power

The capacity of one party in a negotiation to influence the terms of an agreement or the balance of power between negotiating parties.

Supply

The total amount of a product or service available for purchase in a market.

Mediation

Conflict resolution procedure in which a mediator hears the views of both sides and facilitates the negotiation process but has no formal authority to dictate a resolution.