[rbozung]

I heard that this is heavily tested and there are so many exceptions and differences. Does anyone have a nice summary of all of the basis rules (i.e. basis taken by corp vs. contributed shareholder, and basis taken by partnership vs. partner with all of the gain and loss rules when both contributing property/services/cash and distributing the same in both liquidating and non liquidating transfers? This may be allot to ask, but if anyone out there has found a way to simplify it please help! I feel like I am going in circles!

BEC - Passed
AUD - Passed
FAR - 10/28/14 (waiting results)
REG - Passed

[panictimme]

bump

[Anonymous]

My exam is on Oct 20, i will try to summerize something in 2 weeks if nobody has beat me to it by then.

I added this topic to my favorites so i won't forget (hopefully).

[rbozung]

Thanks. My exam is tomorrow! I think basically I am trying to keep the following in mind:

1. For corporations, contributed property by a shareholder is simply the basis of the contributor + any gain recognized by shareholder or boot received (lower of the two). Gain recognized by the shareholder is to the extent that liabilities assumed by the corporation exceed the basis in the assets contributed by the shareholder. Distribution of corporate property for shareholder: the amount distributed is the FMV less any liability assumed by the shareholder. Basis of that property to the shareholder is FMV. It is important to remember that whenever appreciated property is distributed by a corp, a gain must be recognized but not a loss. Distribution to the shareholder is treated as follows: 1. ordinary dividend to the extent of earnings and profits (remember that current year is treated separately from accumulated E&P. If no accumulated, still use current year earnings (don't net them), 2. tax free to the extent of basis in the stock 3. gain treated as capital gain.

2. For partnerships, the basis for the Partnership when a partner contributes property is the Partner's basis. Partnership distributed property for the Partner is the adjusted basis of the Partnership property right before distribution. Partner's basis is cash and property contributed (partner's basis) less: 100% of mortgage assumed by partnership + partner's portion of the mortgage based on ownership + partners's share of debt (recourse is only assumed by GPs while non-recourse is assumed by all partners) + value of services contributed +/- partner's share of income/loss from the Partnership – debt reduction of the partnership (partner's share) – Distributions to partner. For Partnerships, No gain can be recognized unless cash is also distributed. However, in a liquidating distribution, the property basis distributed is a plug since the ending basis must be zero (so, less any cash received in the distribution). Note that the capital account shown on the Partner's K-1 is NOT the same as basis. The accounts can differ.

Those are the main points that I have seen. Good luck!

BEC - Passed
AUD - Passed
FAR - 10/28/14 (waiting results)
REG - Passed

[Author]

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