The Simmons Partnership is discussing the tax implications with their long-time
CPA, Ms. Susan Money. The Simmons Partnership had three original partners: Jim
Dale, Eddie Rabbit, and Katherine Evans. In 2018, Jim and Eddie each contributed
$200,000 for their partnership interests, and Katherine contributed land having a
a $200,000 FMV and a $260,000 Basis. The land remained a capital asset inthe
Late in 2019, Katherine sold her interest in the partnership to Lucy Smith for
$200,000. A few months later, Simmons Partnership sold the land to an outsider
for $200,000. The Partnership made no Section 754 election.
The current partners are now seeking advice from Ms. Money, CPA to explain the
tax consequences of all these transactions to both the Simmons Partnership and
to partners, especially Katherine Evans and Lucy Simmons.1) In a one-page memo (plus citations), please
explain the tax consequences of
these series of events to the Partnership and the Individual Partners. This would
include BOTH basis issues AND income taxation issues regarding the sale of
Katherine’s partnership interest and the subsequent sale of the land by the
Simmons Partnership. (NOTE: Do you see any type of potential abuse? If so, what
type of abuse note)?
2) The logic behind your numbers and calculations must be shown and explained.
3) The project ‘s EXPECTATIONS is simple: RESEARCH. This project ONLY requires
researching the IRC and the associated Treasury Regulations. Tax Cases are not