Question: Bruce died on June 1 of the
Bruce died on June 1 of the current year. On the date of his death, he held a oneÂthird interest in the ABC Partnership, which had a $100,000 basis including his share of liabilities. Under the partnership agreement, Bruce’s successorÂinÂinterest, his wife, is to receive the following amounts from the partnership: $130,000 cash, the partnership’s assumption of Bruce’s $20,000 share of partnership liabilities, plus 10% of partnership net income for the next three years. The partnership’s balance sheet immediately before Bruce’s death is as follows:
a. What are the amount and character of the gain or loss that Bruce’s wife must recognize when she receives the first year’s payment?
b. What is the character of the gain recognized from the partnership interest when she receives the payments in each of the following three years?
c. When does Bruce’s successorÂinÂinterest cease to be a member of the partnership?
Transcribed Image Text:
Partnership's Basis FMV Assets: Cash Receivables $100,000 90,000 40,000 70,000 $300,000 $100,000 90,000 40,000 220,000 Inventory Land Total $450,000 Liabilities and capital: Liabilities $ 60,000 80,000 160,000 $300,000 $ 60,000 130,000 260,000 $450,000 Capital-Bruce -Others Total
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