Use the following data for PartA through E.<\/p>\n\n\n\n
The balance sheet (with fair market values displayed) is for a three-person service partnership with three equal partners. Thornton enters into a retirement agreement with the partnership that provides for payments of $33,500 annually for 4 years and liability release of $6,000 at the end of the payout period. The partnership agreement does not provide for property payments to a partner for the partner\u2019s share of goodwill.<\/p>\n\n\n\n A. Select ALL OF THE TRUE STATEMENTS<\/strong> from the list below.<\/p>\n\n\n\n – the total payments to Thornton under the agreement are $134,000<\/p>\n\n\n\n – the total payments to Thornton under the agreement are $140,000<\/p>\n\n\n\n – the total of the payments received less Thornton\u2019s outside basis will be treated as capital gain<\/p>\n\n\n\n – part of the payments will be treated as ordinary and part as capital<\/p>\n\n\n\n – the partnership will receive a deduction from ordinary income for part of these payments to Thornton<\/p>\n\n\n\n – the payout agreement above is fixed<\/p>\n\n\n\n – the payout agreement above is contingent<\/p>\n\n\n\n B. How much of the total payments received will be considered ordinary income to Thornton? DO NOT USE COMMAS OR DOLLAR SIGNS IN YOUR ANSWER!!<\/strong><\/p>\n\n\n\n C. What will be the total amount of the capital gain<\/strong> to Thornton under this payout? DO NOT USE COMMAS OR DOLLAR SIGNS IN YOUR ANSWER!!<\/strong><\/p>\n\n\n\n D. When will Thornton recognize capital gain under this contract?<\/p>\n\n\n\n Year 1<\/p>\n\n\n\n Year 2<\/p>\n\n\n\n Year 3<\/p>\n\n\n\n Year 4<\/p>\n\n\n\n E. Suppose the partnership made a different retirement payout agreement with Thornton. Under this agreement, the partnership agreed to pay Thornton $90,000 in cash and $6,000 of liability release in the first year and 10% of the partnership profits for the following three years. SELECT ALL OF THE TRUE STATEMENTS FROM THE LIST BELOW.<\/strong><\/p>\n\n\n\n Thornton would recognize $1,000 of capital gain in the first year<\/p>\n\n\n\n All payments after the first year would represent ordinary income to Thornton<\/p>\n\n\n\n The payments to Thornton would represent a guaranteed payment<\/p>\n\n\n\n The partnership would receive a deduction from ordinary income for all the payments to Thornton<\/p>\n\n\n\n Thornton is considered to continue as a partner until the Section 736(a) payments are completed<\/p>\n\n\n\n F. Assume the abbreviated balance sheet below (shown in fair market values) for a three-person service partnership. All partners were equal 1\/3rd partners.<\/p>\n\n\n\n Partner Standish dies on July 31st<\/sup> of the year (the partnership is a calendar year partnership). The partnership agrees to make a $95,000 payment to Standish\u2019s estate to buy out the estate\u2019s interest in the partnership. SELECT THE FALSE<\/u><\/strong> STATEMENT FROM THE LIST BELOW<\/p>\n\n\n\n Standish\u2019s estate will take a fair market value at date of death basis in its share of all partnership assets so it will not recognize any gain on the receipt of the $95,000 from the partnership.<\/p>\n\n\n\n The estate will recognize $15,000 of ordinary income upon receipt of the $95,000 just as Standish would have if she had lived.<\/p>\n\n\n\n The estate will not recognize any taxable income on $80,000 of the distribution.<\/p>\n\n\n\n The partnership tax year will close for partner Standish on the date of death<\/p>\n","protected":false},"excerpt":{"rendered":" Use the following data for PartA through E. The balance sheet (with fair market values displayed) is for a three-person […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[1],"tags":[],"class_list":["post-4241","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"acf":[],"yoast_head":"\n<\/td> Value<\/td> Tax Basis<\/td><\/tr> Cash<\/td> 240000<\/td> 240000<\/td><\/tr> Unrealized Receivables<\/td> 60000<\/td> 0<\/td><\/tr> Unstated Goodwill<\/td> 60000<\/td> 0<\/td><\/tr> Other Property<\/td> 60000<\/td> 45000<\/td><\/tr> Total<\/td> 420000<\/td> 285000<\/td><\/tr> <\/td> <\/td> <\/td><\/tr> Liabilities<\/td> 18000<\/td> <\/td><\/tr> <\/td> <\/td> <\/td><\/tr> Capital<\/td> Value<\/td> Tax Basis<\/td><\/tr> Norton<\/td> 134000<\/td> 95000<\/td><\/tr> Horton<\/td> 134000<\/td> 95000<\/td><\/tr> Thornton<\/td> 134000<\/td> 95000<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n <\/td> Value<\/td> Tax Basis<\/td><\/tr> Cash<\/td> 180000<\/td> 180000<\/td><\/tr> Unrealized Receivables<\/td> 45000<\/td> 0<\/td><\/tr> Other Property<\/td> 60000<\/td> 48000<\/td><\/tr> Total<\/td> 285000<\/td> 228000<\/td><\/tr> <\/td> <\/td> <\/td><\/tr> Capital<\/td> Value<\/td> Tax Basis<\/td><\/tr> Lowell<\/td> 95000<\/td> 76000<\/td><\/tr> Standish<\/td> 95000<\/td> 76000<\/td><\/tr> Mellon<\/td> 95000<\/td> 76000<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n