Scott Is a 50% Partner in the LS Partnership

question 12

Essay

Scott is a 50% partner in the LS Partnership. Scott has a basis in his partnership interest of $84,000 at the end of the current year, prior to any distribution. On December 31, Scott receives an operating distribution of $9,000 cash and a parcel of land with a $21,000 fair market value and a $12,000 basis to the partnership. LS has no debt or hot assets. What is the amount and character of Scott's recognized gain or loss? What is Scott's basis in the distributed property? What is Scott's ending basis in his partnership interest?

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Definitions:

Autonomous Investment

Investment in an economy that does not depend on the current level of income or production, often driven by innovation or governmental policy.

Aggregate Expenditure

The total amount of spending in the economy that includes consumption, investment, government purchases, and net exports.

Simple Spending Multiplier

The ratio of a change in real GDP demanded to the initial change in spending that brought it about; the numerical value of the simple spending multiplier is 1/(1 + MPC); called “simple” because only consumption varies with income.

Marginal Propensity

Describes the portion of additional income that an individual is willing to spend on consumption rather than saving.