38480336
Description
Flashcards by Brandie Westhart, updated more than 1 year ago
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Created by Brandie Westhart
over 1 year ago
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| Question | Answer |
| Carryover basis | the basis of an asset the transferee takes in property received in a nontaxable exchange. The basis of the asset carries over from the transferor to the transferee. |
| Disproportionate distributions | partnership distributions that change the partners’ relative ownership of hot assets. |
| Hot assets | unrealized receivables or inventory items defined in §751(a) that give rise to ordinary gains and losses. The exact definition of hot assets depends on whether it is in reference to dispositions of a partnership interest or distributions. |
| Inside basis | the tax basis of an entity’s assets and liabilities. |
| Inventory items | (for sale of partnership interest purposes) classic inventory defined as property held for sale to customers in the ordinary course of business, but also assets that are not capital assets or §1231 assets, which would produce ordinary income if sold by the entity. There are actually two definitions of inventory items in §751. The §751(a) inventory items are defined in §751(d) to include all inventory items. The §751(b) definition includes only substantially appreciated inventory. |
| Liquidating distribution | a distribution that terminates an owner’s interest in the entity. |
| Negative basis adjustment | (for special basis adjustment purposes) the sum of the recognized loss and the amount of the basis increase made by an owner receiving the distribution. |
| Operating distributions | payments from an entity to its owners that represent a distribution of entity profits. Distributions generally fall into the category of operating distributions when the owners continue their interests in the entity after the distribution. |
| Outside basis | an investor’s tax basis in the stock of a corporation or the interest in a partnership or LLC. |
| Partnership interest | an intangible asset reflecting the economic rights a partner has with respect to a partnership, including the right to receive assets in liquidation of the partnership (called a capital interest) and the right to be allocated profits and losses (called a profits interest). |
| Positive basis adjustment | (for special basis adjustment purposes) the sum of the gain recognized by the owners receiving distributed property and the amount of any required basis reduction. |
| Special basis adjustment | an optional (sometimes mandatory) election to adjust the entity asset bases as a result of an owner’s disposition of an interest in the entity or distributions from the entity to its owners. |
| Substantial basis reduction | negative basis adjustment of more than $250,000 resulting from a distribution from an entity taxed as a partnership to its owners. |
| Substantial built-in loss | exists when a partnership’s adjusted basis in its property exceeds the property’s fair market value by more than $250,000 when a transfer of an interest occurs or if the purchasing partner would be allocated a loss of more than $250,000 if the partnership assets were sold for fair market value immediately after the transfer. |
| Substantially appreciated inventory | (for partnership disproportionate distributions purposes) inventory with a fair market value that exceeds its basis by more than 120 percent. |
| Unrealized receivables | any rights to receive payment for (1) goods delivered, or to be delivered, or (2) services rendered, or to be rendered. Unrealized receivables also include other assets to the extent that they would produce ordinary income if sold for their fair market value. |
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