Personal Bankruptcy and partnership

[equinecpa]

I have a client who declared personal bankruptcy last October. This client was a member of a partnership which she abandoned at the time of the bankruptcy ( there was no debt related to this interest but the property upon which this partnership operated was encumbered). She also let the property go, along with credit card debt.

My question: What happens to her basis in the partnership. I have prepared the partnership return with it terminating upon her bankruptcy. She has remaining basis in the partnership -would this be considered a loss?

She also was a member of another partnership which terminated at her bankruptcy - and she retained the partnership assets as no one claimed them. Is there any tax consequences with this second transaction to her? I'm thinking her acb of the transferred assets will be partnership basis? I'm just wondering if she needs to account for the other 1/2 she obtained in the termination?

One other question: She has charged one of the partnerships for interest incurred on her personal credit card prior to the bankruptcy. The charges on the card were for the partnership. How does this play out -she didn't actually pay the interest that got charged off in the bankruptcy.

Thanks for any assistance you can provide!

Carolyn

[Burke]

I have a client who declared personal bankruptcy last October. This client was a member of a partnership which she abandoned at the time of the bankruptcy ( there was no debt related to this interest but the property upon which this partnership operated was encumbered). She also let the property go, along with credit card debt.

My question: What happens to her basis in the partnership. I have prepared the partnership return with it terminating upon her bankruptcy. She has remaining basis in the partnership -would this be considered a loss? Carolyn

You say the partnership terminated upon her bankruptcy? What happened to the other partner(s)? Was there a buy-sell, or partnership agreement to take care of such eventualities?

[ChEAr$]

termination

You say the partnership terminated upon her bankruptcy? What happened to the other partner(s)? Was there a buy-sell, or partnership agreement to take care of such eventualities?

of a partnership is automatic upon bankruptcy (chapter 7) of one of the partners. The taxpayer's basis in the partnership is still his/her's and will be disposed of during the
bankruptcy's estate.

[Burke]

So the other partner(s) could buy her interest at a price the judge would approve?

[equinecpa]

The partnership business had pretty much ceased operations at the time of her bankruptcy. The remaining assets and bank account all went to her partner.

So then her basis would be dealt with as part of the bankruptcy estate? Should I then be asking to see a copy of the bankruptcy estate filing to be sure ( as I have no idea how the bankruptcy estate would have her correct basis without having the partnership return and figures completed at the time of the bankruptcy). And if her basis isn't claimed there I can claim it on her 2008 return as a loss?

What do you think about the interest she charged to the partnership, and then was part of debt discharged by bankruptcy? I'm thinking it probably is deductible but would like opinions.

2 clients bankrupt last year....and 2 more contemplating it. I'm sure seeing the recession's affect on my client base....