Fatima pays $120,000 cash for Brittany’s one-third interest in the Westlake Partnership. Just prior to the sale, Brittany’s basis in Westlake is $96,0
Fatima pays $120,000 cash for Brittany’s one-third interest in the Westlake Partnership. Just prior to the sale, Brittany’s basis in Westlake is $96,000. Westlake reports the following balance sheet:
\r\nAssets: Tax Basis FMV
\r\nCash $ 96,000 $ 96,000
\r\nLand 192,000 264,000
\r\nTotals $ 288,000 $ 360,000
\r\nLiabilities and capital:
\r\nCapital- Amy 96,000
\r\n- Brittany 96,000
\r\n- Ben 96,000
\r\nTotals $ 288,000
\r\na. What are the amount and character of Brittany’s recognized gain or loss on the sale?
\r\nb. What is Fatima’s basis in her partnership interest? What is Fatima’s inside basis?
\r\nc. If Westlake were to sell the land for $264,000 shortly after the sale of Brittany’s partnership interest, how much gain or loss would the partnership recognize?
\r\nd. How much gain or loss would Fatima recognize if the land were sold for 264,000?
\r\ne. Suppose Westlake has a §754 election in place. What is Fatima’s special basis adjustment? How much gain or loss would Fatima recognize on a subsequent sale of the land in this situation?
\r\n