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When
When
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Step one: The partner first assigns her outside basis to the assets received
in an amount equal to the assets' inside bases (allocating to money first).
Step two: The partner allocates the required decrease to the assets with
unrealized depreciation, to eliminate any existing losses built into the
distributed assets.
Step three: The partner allocates any remaining required decrease to the
distributed assets in proportion to their adjusted bases (AB), after
considering the previous steps using the following equation:
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Step 1: The partner first assigns a basis to any money, inventory, and
unrealized receivables equal to the partnership's basis in these assets. The
partner also assigns a basis to any other property equal to the partnership's
basis in the other property distributed.
Step 2: The partner then allocates the required decrease (outside basis less
partnership adjusted basis in distributed assets) to the other property that
has unrealized depreciation to the extent of that depreciation to eliminate
inherent losses.
Step 3: If any required decrease remains after accounting for the inherent
losses in the distributed assets, the partner then allocates it to all other
property in proportion to their adjusted bases. The adjusted bases used in
this step are the bases from Step 2. We can determine the allocation as
follows:
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Homework
30,
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