Problem NO: 24

Danner Inc. has a $395,000 capital loss carryover that will expire at the end of the current tax year if it is not used. Also, Danner Inc. has been a

Danner Inc. has a $395,000 capital loss carryover that will expire at the end of the current tax year if it is not used. Also, Danner Inc. has been a general partner in the Talisman Partnership for three years and plans to end its involvement with the partnership by receiving a liquidating distribution. Initially, all parties agreed that Danner Inc.’s liquidating distribution would include $50,000 in cash and land with a fair market value of $400,000 (tax basis of $120,000). Immediately before the distribution, Danner’s basis in its partnership interest is $150,000, which includes its $100,000 share of partnership debt.  Talisman Partnership does not hold any hot assets.

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a. What are the amount and character of any gain or loss to Danner Inc.?

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b. What is Danner Inc.’s basis in the land?

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c. Can you suggest a course of action that would help Danner Inc. avoid the expiration of its capital loss carryover?

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