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Tax Treatments for Partnerships, Estates and Trusts

In: Business and Management

Submitted By miliulea
Words 385
Pages 2
Given:
The Year 10 financial statements for a partnership, Fan Company A, have been provided on the “Year 10 Financial Statements” worksheet (see the “Partnership Income and Tax” attachment below). The Year 11 financial data is also provided on the “Year 11
Financial Data” worksheet (see the “Partnership Income and Tax” attachment below).
Use ‘Admit Partner D to Partnership’ template section for this data.
On January 1, Year 11, Partner A died. The partnership agreement stipulated that in the event of a partner’s death, the partner’s interest would be paid to the estate within 90 days of the date of death. The balances in the partnership accounts were determined on January 1. The partnership has the authority by the partnership agreement to sell the deceased partner’s interest at a minimum of
100% of the capital account at the date of death. The remaining partners found an interested party, Partner D, who paid $350,000 for
Partner A’s interest. The partnership agreement specifies that any bonus accruing from the sale of a deceased partner’s interest will be added to the remaining partners as of the date of death. Partner B will receive 5/8 of the bonus and Partner C will receive 3/8 of the bonus.
Use ‘REALIGNMENT OF PARTNERSHIP ALLOCATIONS’ template section for this data.
On October 1, Year 11, the partners agreed to add a new partner. Partner E will own a 20% share of the partnership. Partner E has some expertise that will benefit the partnership. Partner E is investing $50,000 and land worth a fair market value of $200,000. The partnership will assume the $60,000 mortgage remaining on the land. The ownership allocations will be realigned to allow this new owner a 20% interest.
On December 31, Year 11:
The partnership agreement states that all capital balances are paid a 10% interest allowance based on the balance on
December 31, before any distributions of net income or salary allowances. Partner E’s interest allowance in this first year will be based on three months of ownership interest in the partnership.
The partnership agreement stipulates that Partner B and Partner C each receive a salary allowance of $30,000.
A review of the withdrawals by the partners taken during the year revealed the following amounts for each partner: Partner B…...

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