partnership liquidation

[Unregistered]

I've rounded the numbers to make this easy. 2 partners, 50/50, no outside basis.

cash 0
book value assets 40,000
liab 160,000
capital (120,000)

Plan is for parter A to take over company and assets while assuming all liabilities.
So partner B has a "cash" distribution equal to his share of debt.

Parter B
capital -60,000
share of liab 80,000
_______
basis 20,000
distribution -80,000
________
gain on distr. 60,000

Partner A would end of with assets with a basis of 40,00 to depreciate on schedule C

Questions: Does this make sense? A's basis in the assets is limitted to basis of partnership, can't increase by liabilities assumed?

I'm letting this simmer for awhile, any comments would be appreciated.

[Unregistered]

I am not a partnership expert, but here's my view. Both partners had negative capital accounts of 60,000 and 50% of debt of 80,000, so before liquidation they each had basis of $20,000.

I agree that partner B had a distribution of 80,000 when his share of debt was assumed by A. However, whether that would be considered a cash contribution, which would be taxable in excess of basis I don't know.

As far as A, basis would also be $20,000 before liquidation, and increased $80,000 by assuming B's portion of the debt. The basis of the assets transfered to A would be the same as the partnership's, $40,000.

Hope that helps, maybe someone with more knowledge will jump in.

[Unregistered]

Thanks

Thanks for your response fellow "unregistered guest".

[Unregistered]

my gut says that partnership was terminated and remaining "partner" may get a step up in basis, but there are a LOT of partnership rules to consider.

[cpadan]

step up basis?

How do you figure a step up basis? I believe basis of assets would be basis of partership limitted to basis of partner. Partnership terminated because 50% of ownership changed.