Reference no: EM132202930
Question - Michelle 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:
Tax Basis FMV Assets:
Cash $ 96,000 $ 96,000
Land 192,000 264,000
Totals $ 288,000 $ 360,000
Liabilities and capital:
Capital Amy 96,000
Brittany 96,000
Ben 96,000
Totals $ 288,000
a. What is Michelle's basis in her partnership interest?
b. What is Michelle's inside basis?
c. 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?
d. How much gain or loss would Michelle recognize?
e-1. Suppose Westlake has a §754 election in place. What is Michelle's special basis adjustment?
e-2. Suppose Westlake has a §754 election in place. How much gain or loss would Michelle recognize on a subsequent sale of the land in this situation?
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