Partnership Liquidation

Technical topics regarding tax preparation.
#1
Oldcpa  
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Two amicable partners have decided to end their partnership and distribute the assets.
Partner A will get $300,000 cash and a building with a FMV of $500,000 (cost $300,00 and accum Dep of $100,000).
Partner B will get cash of $50,000 and a building with a FMV of $750,000 (cost $650,000 and accum Depr of $50,000).
After reading the regulations, it appears that section 1250 recapture is classified as a "hot asset". I am concerned that this may be a disproportionate distribution.
Any thoughts?
 

#2
Wiles  
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Are you confusing unrecaptured section 1250 gain with recaptured section 1250 gain? Section 1250 recapture would only occur on any additional depreciation on the Section 1250 assets.

Regardless, assuming this is not a disguised sale, I don't see any income recognition on hot assets (if there were any) here.
 

#3
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Are you confusing unrecaptured section 1250 gain with recaptured section 1250 gain?

Maybe.

Regardless, assuming this is not a disguised sale, I don't see any income recognition on hot assets (if there were any) here.

Not so sure about that. If there really are hot assets here, 751b would be invoked, as one partner got way more cold assets than the other. I mean, if you get $100k of cash and I get a fully depreciated machine worth $100k, and we go our separate ways from our 50/50 partnership…what would a 751(b) Exchange Table tell us?
 

#4
Wiles  
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It would tell us that the partner receiving the cash has a $50K ordinary gain.
 


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