Taxation of Distributions: Distributions from Partnerships

College of William & Mary Law SchoolWilliam & Mary Law School Scholarship Repository

William & Mary Annual Tax Conference Conferences, Events, and Lectures

2000

Taxation of Distributions: Distributions fromPartnerships and Limited Liability CompaniesDavid W. LaRue

Copyright c 2000 by the authors. This article is brought to you by the William & Mary Law School Scholarship Repository.https://scholarship.law.wm.edu/tax

Repository CitationLaRue, David W., "Taxation of Distributions: Distributions from Partnerships and Limited Liability Companies" (2000). William &Mary Annual Tax Conference. 188.https://scholarship.law.wm.edu/tax/188

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William and Mary Tax InstituteDecember 2, 2000

Page 1

Taxatim nUistributiLs

Distributionsfrom

Partnershipsand

Limited Liability boll W. 11%. Pt~

Companies A- ,mE -v-#d012c1eiame,

Partnership TerminologyDistribuin Z/

q> "Liquidating distribution"A distribution of money or other property that is made in liquidationof a partners interest.

4 Rae 1.761-1d ((Lcdc6 d a uw taatara .tm aa caWUanaiaua.iPataai by .m~ dabhb~ . OM wneri= 'd dt V2Ua '. .peie by ,:91pr)

1 "Current distribution"A distribution of money or other property that is not a liquidatingdistribution.

4> "Advance" or "draw"* A distribution against a partners distributive share of partnership

income. Advances are not treated as a distribution until the last dayof the partnership taxable year.

Rag 51.731-1(aX1XH)

ID eaor m mto da stb. to Ow exten t fteceshsd~tov Isa ofp Wkawi

Vlw~n S. McI~e a ae~ Taxa i of eaho wid Putnam pie.1903](2d ad.,199) Sa oMtev Cna~~aiiw 91 "7d657t (Or.I C77 . 1993 8 1~ Conmisi. 63rCUCH2911g2 av~ 9271992-2 C. 124 Fav. t.122. 18- .. 1


Page 2

Partnership General Rules Governing

Distributions WA*/'

4> Gain or Loss RecognitionI Distributee partner generally recognizes no gain or loss upon thereceipt of a distribution of cash or other property from thepartnership.

" The partnership likewise generally recognizes no gain or loss as aresult of the distribution.

- Section 731(a)

% Partner's Basis in Distributed Property- Partnership's basis & holding period in the distributed property

carries over to distributee partner.* Section 732 [Basis] and Section 1223(2) (Holding Period]

q Partner's Basis in Partnership Interest- Distributee partner's basis in his/herlits partnership interest is

reduced by the amount of basis allocated to the distributed property.• Section 733.

0 Effect on Partnership Basis in Remaining Partnership Assets- Partnership's bases in remaining partnership assets are unaffected

by the distribution.- Section 734(a)

The Basic Distribution Rules:The fPartner

WAS4

Exceptions

tThe distribution includes an amount of cashthat is

U> In excess of the distributee's basis inhis/her/its partnership interest,

Thenq Gain is recognized to the extent of the

excess.The gain so recognized is generallycapital gain.

I

PartnershipDistributions


Partnership

Distributions ,

The Basic Distribution Rules:The Distributee Par'ner"

S/ide 5 /

ExceptionsCash in Excess of Basis Exception

For the purpose of applying the "cash in excess ofbasis" exception, "marketable securities" aregenerally, but not always, considered "money" [to theextent of their FMV].

0 Section 731(c).Exceptions:

q> Distribution is to the partner that originally contributed themarketable security to the partnership.

q> The marketable security was not a marketable security whenit was acquired by the partnership.

l> Distributions by "investment partnerships" to "eligiblepartners."

The Basic Distribution Rules:The bistributee Partne,

5/Id6 /

ExceptionsRecapture of Pre-Contribution Gain

In the case of a distribution of property other thanmoney,4ff-

The distributee has a deferred net Section 704(c)(1)(B)gain built into his/herlits partnership interest as Of thedate of the distribution,

* Section 737 generally accelerates that gain by requiringthe distributee to recognize gain to the extentof thelesser of-

- The excess of the FMV of the distributed property over the distributee's. basisin the partnership interest [reduced by any money distributed In thesame transaction), or

- The net amount of the dilstributee's Section 704(c) deferred gain that wouldbe recognized under Section 70c ()(B) If 1ll o the disbibute partiersSection 704(c) assets had been doisrbuted oother partners.

Page 3" I

J

J

SPartnershipDistributions11 1

--William and Mary Tax InstituteD~ecember 2, 2000

Partnership

Distributions

The Basic Distribution Rules:Th itiue ate

Partnership The BasicDistributions The

Exceptions

51id 7

Distribution Rules:Distribute e atf

ExceptionsRecapture of Pre-Contribution Gain

Note:t Section 737 is not applicable to deferred Section

704(c) losses.Note:t "Section 737 gain" -

• Increases the partnership's basis in the Section 704(c) propertycontributed by the distributee4 [regardless of whether a Section 754 election is In effect], and

* Reduces the amount of any additional Section 704(c) gain thedistributee partner must subsequently recognize.

"Disproportionate Distributions"

Disproportionate distributions ofunrealized receivables and substantiallyappreciate inventory.

* The distributee partner receives more or lessthan hislherlits share of unrealized receivablesand substantially appreciated inventory,

U Then* Section 751(b)otaxes both thedistributee

partner and the partnership.

Page 4


Partnership f

Distributions

The Basic ADistribtion Rules:T~he bitibtePACI'tnl

TW- S/ide 10/

The Basic Distribution Rules:

51W9 /

Exceptions"Disproportionate Distributions"

0 The distributee partner and the partnership-aretaxed as if-

The distributee first received his/her/its proportionateshare of the partnership's1. unrealized receivables and substantially appreciated Inventory,

and2. other assets

[with the normal Section 731-737 recognltlon/basisletc. taxconsequences],

q and thenIn a fully taxable exchange between the distributee and thepartnership, exchanged

1. those assets that the distributee was treated as havingreceived, but did not actually receive, for

2. those assets that were actually received.


i Purpose of Section 751(b):* To reserve character of ordinary income appreciation,

* To prevent shifting of the ordinary income from onepartner to another.

* Part of an Integrated (but imperfect) system thatincludes:+ Section 704(c);4 Section 724;4 Section 732(c)(1);4 Section 735(a);4 Section 737;4 Section 751(a).

Page 5

SPartnershipDistributions

-WIlliam and Mary Tax InstituteDecember 2, 2000

Partnership

Distributions


The Basic bistribution Rules:The biktpibu fee PartnerS/id 1J ;


4 Many tax practitioners and tax scholars considerthese extraordinarily complex rules to beunnecessary and inequitable (e.g., acceleratetiming of recognition for no sound policy reason).

u These rules are seriously deficient in terms ofachieving their policy objective.* For example: FW I PSBW

I1 1 $100 1$100

The partnership disftbuftr I : $100 1 $10to equal Partner A all of the Inwntory 1 amdto equal Parter B oil of te mventory 2.

Result: Shift in the inmdence of the $45 of ordiaipy incm fmw Partn A to Art a/I


4 Section 751 (b) is inapplicable to certaindistributions:

*The partnership has only one class of propert (i.e.,"Section 751 asset" class and "non-Section 75-1 asset"7class];

* The distributee partner receives hislher proportionateshare of assets in each class

• The distributee partner receives back property originallycontributed to the partnership by him/her;

* The distribution is a cash advanceldraw against thedistributee's share of partnership income;

* The distribution is taxable urider Section 707 (a) through(c);

* The distribution is taxable under Section 736(a).m I

Page 6

PartnershipDistributions q


Partnership

Distributions

The Basic Distribution Rules:hisfiue Patnmel

In GeneralBasis of bistributed Property

0Under Section 732,• The basis to the distributee partner of

the distributed property is generallyequal to the partnership's basis in suchproperty immediately prior to thedistribution.

U

The Basic Distribution Rules;The istibutee Partne,

Slide 14

ExceptionsBasis of bistributed Property

%If-• The partnership's basis in distributed property exceeds

the distributee's predistribution basis in his/her/itspartnership interest,

t Then,* Under Section 732(a)(2), the distributee's basis in the

distributed properties Is limited to his/her/Itspredistribution partnership Interest basis, and

• This basis is generally allocated between the distributedS.assets In-the manner required-by Section 732(c).

Page 7



I q

Partnership

Distributions

The Basic Distribution Rules:The bistributee Par'tner

5Iide15 ,'

ExceptionsBasis of Distributed Property

%lf-- The distributee acquired his/herlits interest in the

partnership in a sale or exchange transaction or upon thedeath of a former partner, and

" A Section 754 election was not In effect with respect tothe acquisition,

t ThenUnder Section 732(d),4 The distributee may nevertheless be entitled (or, in some

cases, required), under Section 732(d), to treat the basis ofthe distributed property distributed as if it had beenadjusted under the optional basis adjustment provisions ofSection 743(b) upon the acquisition of his interest

The Basic Distribution Rules:The bistributee Patner

Skd 16 7I Exceptions

Basis of Distributed Property

t In the case of "marketable securities" treated as"money" under Section 731(c),,- The distributee partner's basis in such marketable

securities will be the amount initially determined underSection 732, and then

* Increased by the amount of gain recognized on accountof the distribution of those marketable securities.

U I

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q JI

SPartnership DistributionsI


Page 9

The Basic Distribution Rules:The bistribut ee Partner3Is 1 /

ExceptionsDistribution of Encumbered Property

Rev. Rul. 87-120:

q First:- Increase the distributee partner's adjusted basis in

hislher partnership interest by the amount of theencumberance;

4 Then.* Decrease each partner's basis (including the

distributee partner's) in their respective partnershipinterests under Section 752(b).

I I

PartnershipDistributions q


I I

Page 10

The Basic Distribution Rules:The *itiueaPr~

.,5f4 l .19 /"

ExceptionsHolding Period in bistributed Property

k Under Section 735(b),The distributee is permitted to"tack" the partnership's holdingperiod in the distributed propertiesonto hislherlits own.

U I

The Basic Distribution Rules:PartnershipDistributions

In GeneralCharacterization of Post-distribution Gain or Loss

' Section 735(a) sets forth special rulesunder which* post-distribution gain or loss realized by a

distributee upon a subsequent sale of" distributed unrealized receivables or inventory* may be characterized as ordinary income or

loss* regardless of the character of the property in

the distributee's hands.

TheV itrbtepartner_VA 2 1I



Page 11


5de 21 /

In GeneralPost-Distribution Cost Recovery

t Section 168(i)(7) provides that a distributeereceiving a Section 731 distribution of recoveryproperty generally must compute cost recoverydeductions as would the partnership if theproperty had not been distributed," But only to the extent that the distributee's basis in the

property does not exceed the partnership's basis.* The distributee therefore "steps into the shoes of the

partnership," and is therefore bound by all MACRSelections made by the distributing partnership.

q Exception:* This rule does not apply to constructive distributions

triggered by partnership terminations under Section708('o)(1 )(1O.

The Basic Distribution Rules:The bistributee Partnw

5,j. 22 /

ExceptionsPartner's Basis in Partnership Interest

k>Under Section 733,The distributee's partnership interestbasis reduced (but not below zero),4 by the amount of money and+the distributee's adjusted basis of any other

property received in the distribution.

h a

!EOEEEEM

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William and Mary Tax InstituteD~ecember 2, 2000

LquidatingDistributions

The Basic Distribution Rules:The bistributee Partner

S/IA t2 /

Page 12

The Basic Distribution Rules:The~ b/stributee PartnerSI/ai I3/

In GeneralLiquidating Distributions: Nonrecognition

'> Distributions by a continuing partnership in completeliquidation of a partner's interest are governed by Section7396,1

Under which distributions attributable to a distributee'sinterest in partnership property are generally taxedunder thegeneral distribution provisions of Sections 731through 735, 737, and 751(b).

0 If a liquidating distribution is received in connection with theliquidation and termination of the partnership itself (asdistinguished from the liquidation of a single partner'sinterest),

All distributions (including distributions with respect tounrealized receivables and goodwill) are taxed underSections 731 through 735, 737, and 751 (b), withoutreference to Section 736.

In GeneralLiquidating Distributions: Nonrecognition

q> Except to the extent that a liquidatingdistribution results in a Section 736(a)payment or a Section 751(b)exchange,

Section 731 generally prevents therecipient of a liquidating distributionfrom recognizing either gain or loss.

I

iUquidatingDistributions


LiquidatingDistributions

iUquidatingDistributions

The Basic Distribution Rules:The bistr/butee PartnerShide Z5

The Basic Distribution Rules:The bisb e

-VA* 26/

Page 13

I I

ExceptionsLiquidating Distributions: Nonrecognition

t As is the case with respect to current distributions,The distributee must recognize gain to the extent the amountof money (plus the FMV of certain marketable securities)distributed exceeds his/her/its predistribution partnershipinterest basis.

t The distributee may recognize a loss, but only if-. The liquidating distribution consists solely of money,

unrealized receivables, and/or inventory, and" The amount of money and the distributee's basis in the

unrealized receivables and Inventory Is less thanhis/her/its predistribution partnership interest basis.

In GeneralLiquidating Distributions: Basis of Distributed Property

% Under Section 732(b) & (c), the distributee must allocate his/herritsentire basis in the partnership interest to all of the assets receivedin the distribution.

Basis Is generally allocated as follows-- Firs, to cash,* 4 Then to unrealized receivables and Inventory,

* But only to the extert of the partnershp's basis in such assets rd thedisbes partwship interesi basis is not suffiien to give the distrilbisee abasis in these assets equel to that of the partnership. then the distrite'sbasis is ailocated to wuneaized receivables and inventory in ion to thepartnerships basis in such assets, not in proportion to their =a mat values].

* And finallyto ail other distributed assets..- Fkst-. -To th extetf the pevt.ship's basis invthe assets, in proportion to the

partnership's basis in such assets[not in proportion to their fair market values]:* Then: On the basis of relative appreciation, to the extent thereof; and* Fially. On the basis of relative FMV.

X


LquidatingDistributions

The Basic Distribution Rules:The b partner

511* 27 /

Page 14

ExceptionLiquidating Distributions: Basis of Distributed Property

%ff-

• The distributee acquired his/herfits interest in the partnership ina sale or exchange transaction or upon the death of a formerpartner, and

* A Section 754 election was not in effect with respect to theacquisition,

1 ThenUnder Section 732(d), the distributee may nevertheless beentitled (or, in some cases, required), under Section 732(d), totreat the basis of the distributed property distributed as if it hadbeen adjusted under the optional basis adjustment provisions ofSection 743(b) upon the acquisition of his interest

The Basic Distribution Rules:The bistributino Par tership

SA* 2e 7In General

Nonrecognition by Partnership

OSection 731 (b) generallyprohibits the recognition of gainor loss by the distributingpartnership.

- I



Partnership

Distributions

The Basic Distribution Rules:The bistibutino Partnershi,

S /29

Page 15

Exceptionsif- Recognition of Pre-Contribution Gain

* The distributed property is property that was contributed byanother partner to the partnership in exchange for apartnership interest,

tland if* Such contribution was made within the 5 years preceding the

date of the present distribution,

t and if* As of the date of the distribution, there remains any deferred

Section 704(c) gain or loss with respect to such property,

q>then* Under Section 704(c)(1 )(B) & (2), the contributing partner must

enerally recognize all of the remaining deferred ction04(c) gain or Foss with respect to such property.

The Basic Distribution Rules:The bistribut'no Partnershig

Si /

Exceptionsbisproportionate bistributions

qDisproportionate distributions ofunrealized receivables andsubstantially appreciate inventory.& Section 751(b), supra.

m

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Page 16

The Basic Distribution Rules:The bisributino Partnershi

5iid*31 ,'-

In GeneralBasis in Retained Assets

%Under Section 734(a),The partnership's basis in itsremaining, undistributed assets isgenerally unaffected by thedistribution.

I

The Basic Distribution Rules:SPartnership

Distributions

i ExceptionsSection 754 Election

0If a Section 754 election is in effect for thedistribution," Section 734(b) requires adjustments be made to

the partnership's undistributed assets,* To account for any gain or loss recognized by

the distributee and for any differences betweenthe partnership's basis in the distributed assetsand the basis that the distributee takes in thoseassets.

" Section 755 and the regulations thereunderprescribe the manner in which theseadjustments are to be made.

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IPartnershipDistributions



The Basic Distribution Rules:The bistributine, Perrtnepshin

5A*34 /

Page 17

The Basic Distribution Rules:The iiti ui oP r n iPartnership

Distributions

Section 734(b)Section 755 Allocation of Basis

Step 1: The partnership's assets are divided into twoclasses under 755(b): "capital gain assets" (capitalassets and 1231 (b) property) and "ordinary incomeassets" (all other partnership assets).0 The division of partnership assets into capital gain assets

and ordinary income assets-involves a careful analysis of allpartnership assets, both tangible and intangible, includingthose, such as goodwill, that may not be reflected on thepartnership's books.

u This analysis may involve factual problems, but generallydoes not present analytical difficulties.


Step 2: A determination is then made as to the classof assets to which the Section 734(b) adjustment isallocated.

q: Step 2A: If the Section 734(b) adjustment Is the result of anincrease [or decrease] in the distributee's basis in thedistributed assets [as compared with the partnership's basisIn such assets] of a certain class,* the basis of retained partnership assets of the same class is

decreased [or increased] by that amount% Ste p 2B: If the Section 734(b) adjustment is a consequence

of the recognition of gain or loss by the distrlbutee,* the adjustment is allocated entirely to the partnership's

retained capital assets.


PartnershipDistributions !

iPartnershipDistributions

The Basic Distribution Rules:The bistributino Partnershin

_____________ l 36 /

I

Page 18

The Basic Distribution Rules:Thp 1istrihutino Paratng,'hin

Slide 35

-C.me+inn 7qAfIk

Section 755 Allocation of Basis

Step 3: The Section 734(b) adjustment is then allocated tospecific assets in the appropriate class.% The adjustment attributable to a class of partnership assets is

allocated among the assets in the class "in a manner which has theeffect of reducing the difference between the fair market value andthe adjusted basis of partnership properties,"

unless the partnership receives permission to make this allocation Inanother manner under the Regulations.

% Thus the adjustment is allocated so as to reduce proportionatelythe difference between the fair market value and the adjusted basisof each asset in the class." If the adjustment increases the basis of assets in the class,

4 then any loss assets In that class are excluded from the allocation." Conversely, if the adjustment decreases asset bases,

4 gain assets are excluded.


In applying these allocation rules, the basis of anasset cannot be increased above its FMV [or reducedbelow zero].4 If an adjustment is allocated to a class in which the

partnership does not have the requisite retained appreciated[or depreciated] property,* The excess adjustment is "suspended":

4 It is applied to subsequently acquired property in that classto the extent of that property's post-acquisitionappreciation [or depreciation] in value.

w-


Partnership The BasicDistributionsT i

ExceptionsSection 737 Gin

Distribution Rules:oibutino Partnersvhm

Page 19

The Basic Distribution Rules:The bistributino Partnarshin

5fi* 37 /

ExceptionsSection 751(b)

0The partnership's basis in the assetsit "acquired" in a hypothetical Section751(b) exchange is equal to their costunder Section 1012

[regardless of whether a Section 754election is in effect].

5v/&-V1

0Any "Section 737 gain" recognized bythe distributee" increases the partnership's basis in the

Section 704(c) property contributed bythe distributee (regardless of whether aSection 754 election is in effect], and

* reduces the amount of any additional-Section 704(c) gain the distributee mustsubsequently recognize.

1 1



Salient Facts:The distribution to Partner A is

'Current," and eitherS Proportionate' [only the distribution to Partner Ais depicted], or

-The partnership owns no 751 assets"V The partnership has no assets subject to 6704(c)

90% 10%A/S =5$900K AB=IO

12/31/03 12131/03

AJ 12/31/03Partnership

with Cash cabuions in11,3by Partnes A-T

Salient Facts:The distribution to Partner A Is

' urrent.' ow either l-"Proportionate' [only the distriuton to Partner A

is depicted]. or.The pcrerhip owns no "751 assets

The partnership has no assets subject to 6704(c)

AS = S.J 9M Ads-$IO

1/31M 1 12/31/03 W

cab $ s 0

AFwS.IV-PU.A$ 30KC

FNV:$77Bl S JTK Inod bulf sof $BOW

TxCneuecst

kM. 1. Oissfad F%

-0~1

f Af

6 51kfe /

A~soTmbrR WNo Aj.

Page 20

clo'AtL 5/ t,.,

$oN/A

$30K

N/A

N/A

$70K

cso.v Age A. 1.


Salient Facts: Same as Ex. la, except--T to Partner A is

S and either•* rtionate" [only the distribution to Partner A

is depicted], or-The partnership owns no "8751 assets'

v The partnership has no assets subject to 6704(c)

90% 10%AB =S900K A/1 =$100K

12/31/03 12/31/0

B--J 12310

jNan- mhip FMV= !lartnerh FMlSp0Ammts: Balanc She ~e Bh 1

ko.71 M: Patners FlY = S 30K

13iJ: Inakle Sams - SSWel

Salient Facts: Same as Ex. la, except--The di*jgi to Partner A is41quidotijnd either

rtionate" [only the distribution to Partner Ais depicted], or4

*The partnership owns no "8751 assets• The partnership has no assets subject to 8704(c)

90% 10%AMD =$90K AIB =$100K

12/31/03 12/31/03

A-J 12/1/03Partnelrship

$

-Vide 41

6*bA I , 0

N.M.1 at Gh

""'3

-$70K,

$30K

N/A

N/A

N/A

fI.,S/i 42 7

J

$0

M WNA lo Adj.

~u. $70K:

ITk-g Immedliate

1C *30 1 L 1100s. $ 0

P w n w , m P :It Y

d -Jw hui sw Smis.

Page 21



" 'Current,' and either 1* Poportionate" [only the distribution to Partner A

is depicted], or.The partnership owns no 751 assets"

" The partnership has no assets subject to 5704(c)

90% 10%A/S =$900K A/ =$100K

1Z/31/03 A1/03


" Current.' and either- Proportionate' [only the distribution to Partner A

is depicted), or-The partnership owns no "51 assets"


iLam a- 5Wid 43

su .cted h1 "M, ,

Iwdb Pu i. k~oen~ht

0Owwtw of bwhmbtm

hweOfb*w y6Iwwb41k.f s NP

$20KC

Copfti

$120K

WA

WA

$0

~'v~jIggD~ I 2 V,

U _VA* 44 /

GOA a . $0

ISMWA No Adj.

AJatf $20KC

1nu Immediatre

Page 22

l


Salient Facts: Same as Ex. 2a, except--Thiitn to Partner A is

wdaakiti and either t A*. rtionate" [only the distribution to Partner A

is depicted], or-The partnership owns no '8751 assets'

v The partnership has no assets subje-t to 5704(c)

90% 10%ASB -=$900K -ATB =S$100OK

12/31/03 -. 12/31/03

i rkb- ii 11 ,.. I ,-I

CbwllCtw of rki. l L-0

Pint w - hqwln /

Prw kO l"*w

$Z0K

Capital

$120K

N/A

WA

/A

Page 23

.Wide 45

Tax Consequences toPartner A

Tax Consequences to

I Partnership



SCurrnt," and either IProortionte" (only the distribution to Partner A

iThdepicted], or

I The partnership has no assets subject to 6704(c)

90% 10%AB = $ 900K AB $ 100K

12/31/03 12/31/03 FMV - K1/03 A/B = $ 30K

S A-J 12/31/03a rtnership

P\ /


" "Current' and either.Pr9portionate" [only the distribution to Partner Ais depicted], or

-The partnership owns no "8751 assets'" The partnership has no assets subject to 6704c)

90% 10%

AD =5900K ..S1K12/31/03 1/93 . ..

6"A

Hb Folid im O-,r6W

aww-.fw of bwmmtkuw

nC'v,, ,,

$0N/A

$30K

P/S Tacks

Depends an A$70

S'jd* 45

6 , q Roo~ $0

47M WA No Adj.

limb liB

SAn Mff. ffM No Adj.A,., I - ,T11,09

Page 24

Ps~,mnJ~. 2~,

FEC...se To- qu ences to

P e -cer

Acieormfil, -2,n

artner A

21


Salient Facts: Same as Ex. 3a, except--Thedistribonto Partner A is*l"k~iatig~lndeither

o t eonite r [only the distribution to Partner A

is depicted], or-The partnership owns no "S751 assets'


90% 10%AI = S 900K A1BD= S1OOK

1MI/3 1//Mo3 FMV - $ K

/ AJ A/8 -$30K

Lrt:e Bhl* S Paln- shp Cpa

nd:75 FMV m$ 1.1we' sM$IoKSab$ Prtierahi a

Assets: eems 1 $ 9 w0K A Inswde Bais S $1OOK.- : pinallm FMVl-$ 72

• 4.: bnsib Bs = S "M

Salient Facts: Same as Ex. 3a, except--Th~to Partner A Is

.. rtionat [only the distribution to Partner A

is depicted], or-The partnership owns no 751 assets"

V The partnership has no assets subject to 6704(c)

900/ 10% AAMD $900K A/B =$IOOK -

1131/103 12/31/03 ... ...

5/ide 49 ,

-..&s -.O6.tfrbd fr lv

fi

Per.O6.lanl Ukgi . pA. • .w

1V99l/ eD9I

$0

N/A

$100KP/5 Tcs

bepnds an AI

W/A

24%

GOAaw 1saasO $0

s WA No Adj.

m. Q- I $70KT-9 Immediate

Page 25



4 C n." and either 1i .rapornte [only the distribution to Partner Aasdepicted]. o

-The partnership owns no 751 assets'V The partnership has no assets subject to 8704(c)

U? A90% 10%

A/B = $ 900K AS =$100K12/31/03 12/31/03 FMV - $ 30K

A/B -$140K

A-J 12/31/03


' Current.- and either1•Pirortionate' [only the distribution to Partner A

Is depicted], or-The partnership owns no "S751 assets'

lThe partnership has no assets subject to 9704(c)

a A1RP . A90% y0

AiD lu900K A .s100K12/31/03 1/03 ...

Tia Coseunce toyTxIntttDecember A,20

"cta 4 6 0 Lm7

64* 1 b wboed Pv~wty1

o-;s iWS, . Iwn

PON-Oharb~b.4* i.PS

$0WA

$100K

P/S Tadlk

bas on A

$o

CM WNA WoAdj.

1bwa Immediate

Page 26


Salient Facts: Same as Ex. 4a, except--Th distribuionto Partner A is

either• -prtionat¢" [only the distribution to Pa.rtnev A

is depicted], or-The partnership owns no I751 assets'

T he partnership has no assets subject to 6704(c)

1W103 213A)3FMV - 30K(k - 2 3 / 3 A / 8 - $ 14 0 K

Y" -)Frnrh . JPIt~i

Lend: FK -= $ bilo iss so

saw$ - SI partnrship C82MIaNon7$ FVI2 mn FMVB:$ 30K

Assets: Basis • n~e I 1$t0p-rti m FMV or $70

&-J: Irnside Bais = S GO0

Salient Facts: Same as Ex. 4. except--.distribution to Partner A is

udatin.l either lrtionate" [only the distribution to Partner A

is depicted], or-The partnership owns no -r51 assets'

The partnership has no assets subject to 8704(c)

HIbfg P*.d in =;=*d

RWO Yb~o 1rftoe-

FfOw*vklein WS~

S 61 EMWA No Ad.90% 10% A&. ............

A/B S 59O0K A/B z;5100K12/1/3 1/0 FMV = $ 30K Suspnded

A-T 12/31/03 A/B = $ 140K

artnership

u*Iws. ed.toCa so

nd: ftFMV*$ pJ N

N , P s FMV$ M.r5s Insme Bas l O

Page 27

/A 5

P/S Tacks

Depeds n A

NIA

C~~~P~M~yIIA3P

Tax Consequences to

Partner A



V 'Current,' and either 1SPrZportionate; [only the distribution to Partner Ais depicted], or

-The partnership owns no 8751 assets'I The partnership has no assets subject to 6704(c)

90% 10%AAMD = S900K AM cD 100K

12/3/03 12/3103 FMV =$200K

( ~ 1231/03 A/B =$30K

yPartnership


" 'Current.' and either* Proportionate' [only the distribution to Partner A

is de*cted], or-The partnership owns no "71 assets'


90% 10%

A/M =$900K A/B =$100K12/31/03 r2/1/03

A fr,., 1A R / F,/,M

Cot~ d GS.. N/A

Ss sbw"*.. Etq~ $30KCIHdft P.'OW in I;.t P/S Tadks

"Q ~ of D p e d s o n A2R $70K

Th4WA No Adj.

Z Bvh~d Ad~w..UNo Adj.Amws Sr!4

OK TiV -

Page 28

William and Mary Tax Institutebecember 2, 2000

Salient Facts: Same as Ex. 5a, except--t to Partner A is

Tl qudatin-'and eithers lr rtionote" [only the distribution to Partner A

idepcted], or-The partnership owns no 1751 assets"


90% 10% AAJB =S900K * B AI=$ 100K

12/31/03 12/31/03 ....

Ow*-?. .f 6W. . Laos

soft i. boft*.ued h

H ftgPwk.h byu?

?-ODwrbwi,. h NS

Page 29

p q

5 /job 57 /

$0N/A

$100K

P/S Tacks

qbWds n A

N/A

Salient Facts: Same as Ex. 5a, except--The dislhtonto Partner A Is

I a nd either l*Proportionate' [only the distribution to Partner A

is dpcted], or 5 8*The partnership owns no '751 assets'


90% 10% _: I 'S0A/B =Sg900K AB a$ 100K 70

xzu xn/ FMV =$200K Tv Supnded

aPmhtnrshiph mmm m

ld: gFV-$9U*IU so

Pwwwro FUV.$1A04: kiklodeinhS 0

w _-A _w W.-.- 1.- 7

.VA* 58



" 'Current.' and either 1

draptot te" [only the distribution to Partner Aes d ),tej or

-The partnership owns no '8751 assets"" The partnership has no assets subject to 5704(c)

90% 10%AB S900K AD $100K -

12l3/03 12/31/03 FMV - $ 135K

1 0 A/B = $ 200KSa - 12/31/03

marl"ershipi

~~nSrA 5

6 h- I- B,

ftO ft bk~tWead CW.

HM. PWl . bfrba

Pbv-Dwban u b Ai PimI-.0~1,

$0N/A

$30K

$70K

P/S Tacks

Depends an A

$0

Page 30


V "Curret.' and either 1- "roportionate' [only the distribution to Partner A

is depicted], or-The partnership owns no 751 assets'

.( The partnership has no assets subject to 5704(c)

IM WA1NoAd.90% 10%/ 0 ai~~iO

12/3/03 12/03 FMV - 135K F E [j Immediate*" A/ - 200KI '

LW -uv SFV I Pu.A FUV- S13KI

Assts oos 8.3: 1. emis - $SO

M&Ilaqul"SfA* 60

Tax Consequences to


Page 31

$M&WL $0

ch .. - t W/A

kI. Cw,b.d C A. $30K

8-6 brni.*saod qwwiv $70K

Salient Facts: Same as Ex. 6a, except--Tihe h-ibuti, .to Partner A is

1"LiclotingIlond eitherrtionate" (only the distribution to Partner A

is dpcted], or-The partnership owns no "71 ossets'

,' The partnership has no assets subject to 6704(c) •

A WANho Adj.90% 10% . ,kmIi,

3B =$ SAIB 1$10K T $130K1 w i 1 /3 /0 M v .-$ 1 3 K I I I m m edi t e ,A/B - 200K

12/ I31103

PW lh. • .

6* Ubl' d - -

LaId FE:Y * I A EY-s I=

NmI-731 FEY- $1 ft b FY,L Smts: Basis. &3-J kowe Blis-8901

SMde 6Z

-I • 1_C!K



S"Curret." and either 1- Prp rtinate" [only the distribution to Partner Ais depicted]. or. The partnership owns no 751 assets"

"The partnership has no assets subject to 1704(c)

90% 10%AMD = $ 900K A/B =$100K

12/31/03 12/31/03 FMV = $ 170K

123/3 A/B =$ 60KA-J 12/31/03PartnershiV

8.w m . eb.w C407

0.,.-o7

Fbw suit P/


Cuwrent," and eitherSPropo.rtionate' [only the distribution to Partner AIs depicted], or

*The partnership owns no "751 assets"V The partnership has no assets subject to 6704(c)

$0N/A

N/A

$60K

N/A

$40

FMVISId~mma.S30K P lea10KInventory BUal ,$ P .Bwi s nb0K 1O

8-3:4 nk Buis - SSa

Page 32

SfA*e 63/

maws o IAm 7,vf -V* 64 7

A GMMAAW hoc~, $0

SM WA hb Adj.Bub w90% 10% Fwfww W Adj.

A/B = $ 900K AM = $ 1 OOK Atm. gM1wim 12/31/03 FMV 170K _J

A-J 12/31/03 A/B 60K

Whwartnershi-


Salient Facts: Same as Ex. 7a, except--The dstbuti to Part er A is

ll-ducatin .l:jl ether* .oprtionate" [only the distribution to Partner A

is depicted], or-The partnership owns no "5751 assets"

I The partnership has no assets subject to 5704(c)

90% f* 10%A/B = S 900K A =S11001K

12/31/03 1 1231/031

Mo lb 7AV,&d 65 ,

4 40K)

Oa~aww f~ Gb - L- Capital

Ak. ia Ditst~d QA? W/A

so* . atad PA q? $60K

.ft.Ofni.n Dub P, N/A

Page 33

1

Tax Consequences to

Partnership I


I qSalient Facts:

The distribution to Partner A isV 'Current,' and either 1

- =Popotionate [only the distribution to Partner Ad cted], or

.The partnership owns no "751 assets'." The partnership has no assets subject to 6704(c)

r~~I) FMV - $ 200K

90% 10% A/B - $ 8OKA/B =$900K AIB =$100K

12/31/03 12/31/03

A-J 12/31103 FMV - $ 200K'rne hip A/B = $ 1ooK


S"Current.' and eitherrportonate" [only the distribution to Partner A

is depicted), or*The partnership owns no 751 assets'


FMV =_. .200KA/B - 8K

uU o I I U~o IAMD a$900K IIA/B =5100K

12/31/0312/31/

FMV - $ 200KA/B - $ lOOK

Ta Conequ 67e to

6,1- -O.. o h, .. L7

Imoy?OiW- Ow?,bDedGot'l of bitflbaM

Bum 5 bm*ed LM0

Hidft Pe'bd b DW.o d

O,- - of bu-o

PwOi~e~n..,Sem..O

$0

N/A

W/A

$ZOK

P/S Tacs

blpuds on A

$0

sC' '0wI ml, I,.Slide 65 8

64bhl $0

1754NWA t.boAdj.

Fww~ed A.e t$80K

T-9~ Immediate

I m b - S Par~rwrshib CamibiI PVV k *iiv d F s400K

I BairnS$ I0 lO mr Bed s l- $19O0K

Inmnliy Flvl P4,- 0U e V- M 1sub-11 41J 11-J: .- a w*lSO

Page 34

,C'v,,m,,l R,,


Salient Facts: Same as Ex. 8a, except--The di-butinto Prtner A is

- LVidatinJand eitherrtionate' [only the distribution to Partner A

is depicted], or-The partnership owns no '751 assets"


90% 10%A/M =$ 900K AM =$100K

12/31/03

A-J 12/31/03 A/B - $ OOK~Part. . ,-r - I

Land: FM: 20 ~wt FUV.S40K

ais$ 1034( k.sldBla"S10KIne6.FAN : :1,480a: Pwomrs FMV- $3,000K

BMW 41 : B-J e sawSs - SOMC

OsIkm - lw

O2wa .96..Las

Bat-s ,~i t. 0 tsa1nasr5ay

Non-§ni FMV IA0O1 P trs FUV-$,0i- a~ts: Bkasi a $ 104 B-J: huds Basis- =00(

Salient Facts: Same as Ex. 8a, except--Th5.i1rtionnto Partner A is

-1L.iidcatingjland eitherTV rtionate" [only the distribution to Partner A

is depicted], or-The partnership oaws no '751 assets'


90% 10% A/B 80K

A-J 1$2900K A / 103 AB &OO

12/3193 1 /31/03p A-J 0 1] A/B -$100K

Parnershic

2fleflJAft IA

_VA* 70/

IaatesdlA4~.~I$80KllAra 754

- - TJ.I Inmdat.

rI 5 200k-wnr a--,- ,l$ udmrns.l

L~d.FUV. - 400Land. ' 0091 "Misl-is-A.i

kv~tr FKV-Slxoqp awtre PFiV-3RBs*S 410K1 B-.. 1d Bemsa - mOWt

MAstsl: l8lb-!S 41U4Bk- S 41

PWs FUV = 53B-J: hlsJ ml

Page 35

$ON/A

S80KC

N/A

$20KP/S Tocla

b0pasll a A

so

-Vide 69

Tax Consequences to

Partner A



" 'Current,' and either-'Proportionate" [only the distribution to Partner Ais dipicted], or

.The partnership owns no "8751 assets'The partnership has no assets subject to 597 .

~ FMV=$200K $200K

90% 10% A/B-$ 50K $1SOKD =SS0K II A/ =B 100K

12/31/03 12/"31/03 &

A-J 12/31/03 FMV - $ 135K2arteShip A/B = $ 200K


" "Current. and either'ropo.rtionate" [only the distribution to Partner Ais depicted], or-The partnership owns no "751 assets'

" The partnership has no assets subject to 7.

FMV-$200K $200K90% 10% A/B=$ 50K $150K

S=00KXAA =$1-K12/31/03 1/3 AL

A-,T FM4V - $ 135K

Z FlY. 6 llr FRW-l

1 "OY seek.i I Pwtwr*

H.W Psud h N " N

e.* IO~e. 11. 1. 011

low"Psd

1754 N/A

Ales 141b 1rk.:

Am?,A11=7

Cqfta#

Page 36

Ta Coneqene

$0

N/A

25K

75K

N/A

ordhwy 15V-

$0PiS Tacks

0

C vD D _VA* 02w Slide72 /

SoNo Adj.

t $200K

Immedite

1OOK

B..b


Salient Facts: Same as Ex. 9a, except--Tht diiution to Partner A isil. uilat Jnd either

rtionote- [only the distribution to Partner Ais depicted], or

-The partnership owns no "5751 assets'v The partnership has no assets subject to 570041a.

FMV=$200K $200K

90% 10% A18$ 50K $150KA/B = S 900K A/B =$100K

12/31/03 1/31/03 A

i.A-J 1 FMV 1 $ i 35K

X FMV:S UsLibittes so

Inveoly. Bomb B!=t50MInk& €_&l1S1w

Lafnd: ParItne rs FMVIS"400

= Is I 00 J: balkle Basis - 900KZ FM5 3,6dKPartror k F.M S a0sK

im* n $ Bs1 S SK bams - SIOW4

O7-

Tax Consequnce t

.- -fs -

140bDaad 1-sa

111a k, bartbfted L~.~Y)

Ow- of DW"*of

H"iW Par-id ir. OWfrad

,Chta of blarb*.td

$0W/A

25K

75K

W/A

P/S Tacks

oeqarwi an A

0

NS1 XM13=3__ _

Page 37



" "Current," and either 1SProportionate" [only the distribution to Partner Ais depicted], or

.The partnership owns no "1751 assets'" The partnership has no assets subject to 57

0* FMV=$200K $2001

90% 10 A/B=$ 50K $ 301AM =$900K A/ =$100K

12/31/03 1/03

SfA* 73

6.kk-

XI

*4 .w. Pp X bDVwA

Cb~. of Ob~we.d

Saa ftD%.rbd L.d NP

Smf S b1?qfd '.Dw

PW-DbtMWH. Gft W P41a.t..?

SoN/A

50K

30K

N/A

O~hbwy V3 r-81

GK

12K

P/5 Tacks

bepuls on A

So'

Page 38

I

Tax Consequences to

I Partnership


Salient Facts: Same as Ex. 10a, except--The dstributito Partner A is

fl.Lquidatin'l J eithergrtionot [only the distribution to Partner Ais depicted], or

-Th prtnrsipowns no '6751 assets'V The patniership has no assets subject to 570

FMV=$200K $200K90% 10% A/B=$ 50K 30KA/B =$900K AID =$100K1M/3/03 1Z/31/03 .

12A-J/

partnership $200KBaane1 $ 30KX •N hbk.

L FwVlS

z FIV. S&gK

Salient Facts: Same as Ex. lOa, except--Th t o Partner A Is

idat, . = either• ron.t [only the distribution to Partner A

is depicted]. or-The partnership owns no '51 assets"

v The partnership has no assets subject to S7

vFMV=$200K $90% 10% A/B-$ 50K $

A/M a$900K AMB =$ 100K12/31/03 1 r..,1 Al9

L.w * _ P"13 . k" "T*OWIsid swig A r

Zss VEV.1 3N..4. 0", *s urMyil 4 w

's~imp"IM /1

"*A- -w=C

0 . - wf O 1. L

6"y P- b~.~ DI~hmwv

1.1Wemv X AVD4'.cr of Ofb*4d

&.01 1. Ow04*.d L.w At?

Bo*b hl ff04D.d LW W0

V4* FWu4 0 blobed

"PI

VU

N/A

50K

30K(

W/A

Odbwy C5 7141

8K

12K

Oqands on A

P/S Tacks

SoIs______________________________________________

AS. AS IA~'A I flA

WA*

Tax Consequences to

Ac,".an . f A

Partnership

0754 W/A

Ats *m A~4.

Ams Amwlo

Am,

So

No Adj.

T $30K

Immediate

30K

Page 39

-A

Salient Facts: Same as Ex. 10b, except--* Land N was contributed to the Partnership in 1999 by

Partner B* At the time of the contribution. Partner B's basis in

Land N was $30K and its FMV was $140K.

FMV=$200K $200K90% 10% A/B=$ 50K $ 30K

AMB $S900K AS =:$ 100K

12/31/03 12/31/03

-JA- 12/31/03,artnership $ 00K

, , , 3oK30

bI nZ 0, M"FMV.SO .m,, PUS*ULua t.. . a-j -

Ld V * .

6.%A u .R-.-~.w $17.500

HNhw, o~ P/S T.6-k2sW

Sub 4. 60 I.-W"

PwO~,~S a 50K

Buis m O WL.A

Y? 30Kt

- I ~ E I _____________________________________

Salient Facts: Same as Ex. 10b, except--* Land N was contnbuted to the Partnership in 1999 by

Partner B* At the time of the contribution, Partner B's basis in q

Land N was $30K and Its FMV was $140K.

r9AC&PA1 &SO AM INDb

90% 10%ASD z$900K ASB *$100K

12/3103 12/31/03

A-J 12/31/03partnership

z 11V. UMUbW-m-v MWk..11 .

FMV=$20OK $20A/B=$ 5o $ 3(

m n~ $200

$ 3

$I10K recognidzedby Partlaw B *uY

IK [Sec.704(cXlXS)]

OK B's basis in

his/her

par~tneriinterest Is

4K in .ased this__________ aunt.

fm w- N Adj.

h 1It See Beimw

-$0

L Immediate

- I _______________________________ I _____________________________________

Page 40


f/WI-

-ie 7Y /

I ^L.Side8 /

Lin" " • - -

MV.1 in-$,7M.SlI

m-Jb"~ 3 *m-

mos

. ,- '-3 - .,.,..-;.- - ,. _'..


Salient Facts: Same as Ex. 10b, except--Land N was contributed to the Partnership in[ =99 __by ___________

Partner BAt the time of the contribution. Partner Bs basis inLand N was $30K and its FMV was $140K.

y FMV=$2OOK

90% 10% AIB=$ 50KAMB =$900K AIB =S100K

12/31/03 12/31/03

___ ___ 12/31/03 .3

10r " r - n mVkpv

Fwenn Lib =$ Isms1sb~oa"'. bo •t~

By b - S M V -5= e = l

N I.. S 3Z FMV.3LOW

J- %Zk3 $I"NN •

: ZOOK

$ 30K

n$200K$ 30K

.~&- S-0

X7

Zm-"y X a "

I-

ina-b k cbk*hud L.d 07

U~s b DWs~ftged Lw d W:

Hwf PWW b 061=kn

a-,ewl of ft M

SoN/A

50K

30K

N/A

8K

12K

P/S Tacks

bObSeP4 A

N/A

- I _____________________________________

Page 41

54de 81 ,'

f 1104

Tax Consequences to

I Partner A I

Tax Consequences to

Partner-ship

• 1..

_l -

1. . ., • - .1 1



Cumrrent.- and either* Prortinate" [only the distribution to Partner Ais depicted], or

.The partnership owns no "8751 assets-v Asset Y (together with $75K in cash) was contributed

to the art-n hip by Partner A in 2000 when it hadisto Pare 5K and aF oMV $40K.

90% 10%AIB = $900K A/B =5S100K

12/31/03 12/31/03 FMV $ 150K

1/ A/B = $ 30KiA-J 1]/31/03

arnes Plnerhipp

Land: FUVS -$ US fifla B/s IoO

Nan.751 VI 11 Pltur FMV $2.54

stY: Bass B-J: I "d.SiSl W


' Current." and either- Proportionate' [only the distribution to Partner A

is depicted], or.The partnership owns no 751 assets'

- Asset Y (together with $75K in cash) was contributedto the partnership by Partner A in 2000 when it hada stoPartner A 5 Ianda FMV of $40K.

IA90% 10% A

ABS = $ 900K AI- =1OK12/31/03 12/31/03 FMV $ $ 150K

1103 A/B -$ 30K

rW -s : s , h .- 3m1• ~ ~ 13 03v IN, -lS -ib, k , ,,0K

.2b I, .EO" d

hI. ftsd C*qe

- a-

8754 WA

am~

M"

Page 42

Tiax Coseunce MataoIstttDecember A,20

Capial

$0

$30K

PIA Tads

$epe85 K A

$85K

ff lowSAk 54

$0

Asset Y

$15K

I Basis in

Asset YS15K

inmediate


Salient Facts:Same as Example 11o. except that Asset Y wascontributed to the partnership by Partner A in 2000when It had a basis to Partner A of $25K and a FMV of$90K.

90% 10%AMD = S900K AIB =$100K X

121/31/03

lPartnership

G .M Iinow- - of "k.

G.8b In~ D.*W ftr.-l

-oft- .w Pr 0l~

FM ,,S I Laih~eSLand: $ONWI $ Paf~En~ahl Itft

Non-751 FMV: 258 Ul FMV.S 2&VAetX sa ,lS

' Id Bmd.s - $10N

Non-7Y1 BMV$ S 1, PB-J: FMV-$25471M t: Bosis. S 841: hWlde Ons -. 9

Salient Facts:Same as Example 11a, except that Asset Y wascontributed to the partnership by Partner A in 2000when it had a basis to Partner A of $25K and a FMVof $90K.

90% 1 10%AB -S900K A/B SIOOK

12131/03 12/31/

;D.tne Balanc. eet

_ujum NO"-$ 0

Ba"s $31 Pllnlaft CapkwlIN-471 MV-$U IlV $ 23K

Ammt X Bmds - $& mnvs* We Swi- , SIOOKNaw 1Ml FY -$ I PlVO FV -SZ47

lef FlYtk iJ knd ,S171 59

14 N/A

Room"8454A-"m

Page 43

Tax!I ~ Cosqune AoTax ~ 5V Co85ce

$50K

Capital

$30K

P/S Tacks

b.p.ds an A

$120K

I I,5/Ide 86 /

$0

T Basis inAsset Y

$50K

T Basis in

Asset Y

$50K

Immediate

............ III


Salient Facts:Same as Example 11b, except that Asset Y wascontributed to the parnehr-ipbParner A in 1993(when Ihad a basis to Partnetr of 25K and a FMV

of $9O14

tooo o0 I IM-- WA AcU.90%1

AMD = S90IK AID =100K 97

12/31/03FMV. $150K -

A-JT 12/3/03 /B .$ 30K

Partneship

lhlF- S~ILI i S OKIhaOn4g?1 'FV*SZ=Pinw u-Mw -X S B ell 6 M -d.8aW*S1OOMt BL FNV$ i P Ino. d FkhV- - "

A.tlf Bals $ -J: buld. flls -390

Page 44

~I39 Sql ia f IIfSA* 55

Tax Consequence: to

I Partner A I

r


Salient Facts:Same as Example Ila, except that

Asset Y was €ontributed to the partnership by PartnerA in 2000 wherl It had a basis to Partner A at $25Kand a FMV of $65K, andThe partnership also distributed $120K in cash.

90% 10%A/B = 900K A/B = S 100K

12/31/03 12/ 312.31/ FMV - $150KA-J 12/31/03

Cash: 5120K USNll6s 5

Sads i. bibwfteed C.Al

Scas Ms bbisfbod Arq-y?

Hddk9 P.isi i. owfrbfls

_ _ _ _ Parlswrwhi Caol

Fuv-6 Iso FMV- 2a(Vm$15: Plarbwrk

o Ba-si S 0K IidBai* e Si00- 1No4751 FMV- 2,4o0K Paners FMV-$ 2,4

AeX: Ban5$ 4 -: bodSie m$901Non47Sl FNV-.S I =501

A~et Y: aaaw S 2

$40K

Capital

$120K

$20K

P/S Tacks

Opends m A

$0

Page 45

f f'04JVA*

Tax Consequences to

Partner A

Tax Consequences to

Partnership


Salient Facts:Same as Example Ila. except that* The land, and not Asset Y, was distributed to

Partner A.* Partner A had contributed the land to the partnershiI

in 2000 at a time when his basis in the land was $301Cand its FMV was $70K.

90% 0A/1 =$900K A/B =S100K

12l/o/03 12/3 FMV - $150K

Meet1/3/0 A1 -et $ 30K:Ini.Bai

A-J

i, a tn r h A-J Patn rs ip 1

LdFMV= $ lSOKL4"I:kk.o8 86 6 S 30 4 P artn Mh k C w h d

Non4751 FMV-S SO $Z lpmer k FMVI$ S R

ANS X, Basis . $ k Indo Sas - 3100KNon471 MV: S 100 P- h 1r*dFVm - mZ547K

IA18et Y: Bl9 $ 2546: " -$0

r'4LaP~q - Am

LIIF7QwIv

Okwvt P" m Ofrbood, Puq - W ?Chl, w.0 blffh

''0

$oN/A

$30K

P/S Tadcts

b$ods an A

$70K

Page 46

I 4tr.illa a nd 'MTa Conequnce to;

Salient Facts:ABC partnership was for=ed by A, B, and C in 2000 byequal contributions of cash.

L I ~AP~

2/3 || 1/3AM= $ 200K AMB =S100K Building12/31/03 L 12/31/03 FV 10

./ ki I A/B -$60KA-J 12/31/03

,Part'nership

fA $10K

d v w ,. Orhnary

k9be i Od, -- .fw $11OKd,1 Pd , kh, P/S Tacks

Om.f D bwepands o A's iL

I & o Applc4

Page 47


4r


Salient Facts:*ABC fZ r arned b .B n n20by=qul of cash, and

* There Is no agreement as to which non-5ection 751asset Is deemed to be distributed to Partner A.

A/B c S 200KI y1O

17./31/03 U 12/31/03 F V -$ 1 0i6 I I/ A/ - $190K/ A-J 12]/31/03

BI-SmlPrnethp ep

FMV - $120 Plarmld FMIsoBads, .ll S &¢ P. l I I S20

- C~gePAP~ ~I~dl 19A51A Slie6

954 N/A

Ordinary

T Basis in

$20K & IBasis In

Land $10K

T Basis InWilding

$20KC &Basis in

Land $10K

Immediate

Page 48

-- -- - I -

57M I


Salient Facts:* Samee Examjle 12b. =xcept that the p r trs agree 'u.,p f 10

that Partner will be d to hove initiallyreceived a 2/3 interest in the Building. 4 ,,

2/3 1/3 j j

A/B z: $ 200K AMB = $ 100KIMIl/03 12121M0] =MV $120K

12/1/0 A/B -$90K

Bneuiln FMV1 $1201 . .. ilV-$ 10soBMW-,:,] S $ P

ar mr hbInsde It. 10K

SIdin. Im V" $1OI~l m r

FMV- S 10KI

• Bsis $110K8&rc: k.de Basis = $20WK

Ow - -6 ar L,

Bob M Ob~ftoad ft swy

H, ddl P.idl i. 0iersea

Owas f Ow~rbweg

14 -Dm,,.~~r 2. lai I PA $0

Page 49

Tax Consequences to

Partner-ship

Documents

Taxation of Distributions: Distributions from Partnerships