Question

Required information The following information applies to the questions displayed below) 1 of 4 Travis and Alix Weber are equal partners in the Tralix Partnership, which does not have a $754 election in place. Allx sells one-half of her interest (25 percent) to Michael Tomei for $31,000 cash. Just before the sale, Alix's basis in her entire partnership interest is $76,200, including her $31,000 share of the partnership liabilities. Tralix's assets on the sale date are as follows: Book FMV Inventory Land held for investment Totals Tax Basis $ 40,000 $4.see 31.000 94.000 se, see See $152,400 $185, 30e rences

Answer 1

a)

Amount Realized:

Cash                      $31000

Debt                      $15500                                     $46500

Less: Basis in Partnership (1/2 of $76200)            ($38100)

Alix’s realized and recognized gain                           $ 8400

If Tralix sold its assets for their Fair Market Value at the sale date, the ordinary gain would be as follows:

                                                Tax Basis                              FMV                      Gain/ Loss                           Alix’s 25%

Inventory                            $31000                                  $94000                  $63000                                  $15750

Total Gain                            $8400

Less: Ordinary Gain         ($15750)

Capital Loss                         $(7350)

Alix recognizes $15750 of ordinary income and a $7350 capital loss from the sale of her half interest in Tralix.

b) Alix has a remaining basis in Tralix of $38100 (25% of $152400).

c) Michael’s basis in Tralix is $46500 i.e $31000 cash plus $15500 for his share in debt.

d) The sale has no effect on Tralix’s basis in its assets.