Criminal Profiling vs Racial Profiling

Criminal Profiling vs Racial Profiling Racial profiling is a social problem that has erupted throughout the country. Many provinces, cities, social groups, and academics have studied racial profiling and how race and ethnicity may play a part in police investigations. Allegations of racial profiling have been around for years, and still is a subject that creates a lot on media hype and controversy surrounding police and their interaction with minorities. In Toronto, there have been numerous newspaper and television articles accusing the Toronto Police Service of systematic racism (Canadian Race Relations Foundations, 2005). Racial profiling should not be confused with criminal profiling, because they are two different things (Mucchetti, 2006, pp. 1-32). Racial profiling is not specific to one race or one country. Actually being racially profiled can happen to anyone at any time no matter what race or sex or country they live in. This paper will examine racial profiling and criminal profiling by police and explaining how the different sociological perspectives; functionalist, conflict, interactionist, and feminist perspectives view it. The paper will also attempt to argue if there is systematic racial profiling by the Toronto Police. My thesis is the Toronto Police does not systematically racially profile, instead they systematically criminally profile. In order to examine racial profiling and criminally profiling one must understand the differences between the two. Although there is no clear or universal definition of racial profiling, there is a common component in all of the definitions (Ontario Human Rights Commission, 2009). This paper defines racial profiling as the practice of targeting racial minorities for criminal investigation solely or, in part, on the basis of their skin colour (Court of Appeal for Ontario, 1999). According to the Harvard Latino Law Review, criminal profiling involves: The use of racial or ethnic characteristics by police departments in stopping an individual because his or her description matches that of an actual suspect. In this sense, race functions as the equivalent of hair color or height, which can then be used in combination with other factors to paint a more accurate portrait of a suspected criminal. As a result, generalized notions of criminal propensity are not projected onto an individual because of that persons membership in a particular racial or ethnic group (Mucchetti, 2006, pp. 1-32). The term racial profiling began in the 1980s, when the Drug Enforcement Agency (DEA) in the United States developed and used common characteristics to profile drug couriers as part of the agencies war on drugs (Harris, 2006, pp. 213-239). When community members began to complain about police investigations and their actions towards minorities the uses of the profiling technique emerged to be labelled as racial profiling (Ibid). Functionalist, conflict, interactionist, and feminist perspectives all believe racial profiling is one of discrimination, pressure and manipulation of subordinate groups so that the dominant group can exercise their social class, race, and sexual superiority over others (Banks, Eberhardt, Ross, 2006, pp. 1169-1190). Prejudice in racial profiling is caused by psychological and socially constructed influences, where individuals are influenced by their surroundings to hate another solemnly based on their race (Guimond, Dambrun, Michinov, Duarte, 2003, pp. 697-721). The functionalist perspective believes society is divided into two groups, the dominant and subordinate. And, that these groups are a natural part of society (Kendall, Nygaard, Thompson, 2011). Functionalist also believe society is not balanced in terms of race, because it is natural for one group of people to be superior over the other and that racial equality will reduce the dominate group power on subordinate group (Kimberle Williams Crenshaw, 1988, pp. 1331-1387). Therefore, functionalist view racial profiling as being formed by dominate groups to cause the subordinate groups to feel inferior, so they can have their own roles in society because it is how society intended it to be. Conflict perspective believe that all groups in society are engaged in a continuous power struggle because the dominant groups who have social, political and economical power, struggle to maintain their privileged position over the subordinate groups (Kendall, Nygaard, Thompson, 2011). Conflict theorists also believe everyone is equal, despite his or her race, sex or employment, opposed to the functionalist theory (Ibid). They also believe racialized and ethnic inequality is caused due to economic stratification (Ibid). The dominate group determines what laws should be enforced and what penalties are to be administered. They also determine what subordinate group will be targeted, arrested and punished unfairly in order to maintain their positions in a capitalist society. The police are used as a tool by the dominate group to maintain their position in society. Racial profiling by police is only one of the methods used by police to enforce the rules of the dominate class. Symbolic interactionist perspective can be used to explain officers behaviour which is based in social psychology (Kendall, Nygaard, Thompson, 2011). The social dynamics involving the interaction between officer and citizen may influence officers behaviour and cause them to racially profile. The interactionist approach emphasizes how racialized socialization contributes to feelings of solidarity with ones own racialized or ethnic group and hostility towards others (Ibid) which could cause citizens to challenge officers authority if they felt their identities were being challenged, their civil liberties were being restricted, or the officer was acting in a rude behaviour. Although symbolic interactionist perspective does not directly explain why police initially stop minorities, it does explain the social interaction between the officer and citizen and how it could result in the citizen feeling of being racially profiled if the officers interaction was professional. Feminist perspective is based on critical-conflict perspective (Kendall, Nygaard, Thompson, 2011). A feminist view on racial profiling is about gender and race differences, and the limitations associated with traditional male-dominance in society. There is no one feminist perspective that can explain a social problem such as racial profiling because all are theories of oppression, differences, and inequality (Ibid). Social activist groups along with minority groups claims of systematic racial profiling by the Toronto Police Service exists and refer to published articles to support their claims, such as the 2002 series of newspaper articles written by the Toronto Star, and the lack of racial statistics compiled by the Toronto Police Service. In these articles, the Toronto Star articles used empirical data collected from the Toronto Police Services Criminal Information Processing System (CIPS) database. According to the newspaper articles that examined 480,000 files contained within the database, relating to arrest and traffic stops, claim Blacks arrested by Toronto Police are treated more harshly than white, and a disproportionate number of black motorists are ticketed for violations that only surface following a traffic stop. According to civil libertarians, community leaders and criminologists, the difference could suggest that police use racial profiling in deciding whom to pull over (Toronto Star Newspaper, 2009, p. A01). Social and minority groups also support their claims of systematic racial profiling by the Toronto Police Service, as the Service does not collect or release race base statistics. They argue One fears that the only reason the Police Board refuses to release this data is to ensure that the public does not get updated information on racial profiling (Toronto Police Accountability Coalition, 2008). This paper concedes that racial profiling may exist on an individual basis (micro-level) within the Toronto Police Service. This was confirmed by Chief Blair of the Toronto Police Service who was speaking a diversity conference and said: Racism is a human failing. Racial profiling can occur. Weve acknowledged that right up front (Doolittle, 2009). As a police officer, it is obvious that there are errors in the Toronto Stars conclusions. The Toronto Star compiled its data using the files contained in the CIPS database, which only contained files relating to arrest and tickets issued to persons. The problem using only this database is that it does not take into account the number of people the police actually investigate where there were no arrest or tickets issued, or the fact that the CIPS system excludes information on part 1 Provincial Offences tickets; i.e. seatbelt, speeding etc. as it only includes part 3 Provincial offences tickets (more serious offences). By only selecting the CIPS database and not the true number of persons stopped by police skewed the final results. Professor Edward B. Harvey, a PhD, from the University of Toronto confirmed this fact that the Toronto Police database, which was not designed for research purposes, contains so many flaws that its uses in research is limited (Harvey, 2003). The data-collection by the Toronto Star was also disputed by Allan Gold based on the distinction between reactive and proactive policing (2003, pp. 391-399). Gold argues reactive policing could attribute to claims of racial profiling while proactive policing will not. When it comes to the collection of data, the Toronto Start uses both styles of policing which flawed their conclusion (Ibid). It is very well known that any and every methodology in the social sciences is open to criticism and attack (May, 2001). Max Weber a pioneering sociologist and social researcher stresses the importance of proper methodology in social research in examining any social problem, and how crucial it is to understanding the problem (Alasuutari, 2010, pp. 139-155). The Toronto Stars article and how they used the data and the omission of vital data has skewed the final results. These errors have created false evidence of systematic racial profiling by the Toronto Police Service, which has been proven. The argument of race based crime statistics date back to 1929 (Johnston, 1994, p. 166). Social activist groups along with minorities groups have argued that the reason Toronto Police Service is not releasing race based crime statistics is due to the that the Service in fact racially profiling, which would be proven by the statistics (Toronto Police Accountability Coalition, 2008). In fact in 1989 the opposite argument was used by community groups when then Inspector Julian Fantino released crime based statistics, claiming them to be inherently racist calling for their abolishment (Johnston, 1994, p. 166). According to Robin S. Engel an Associate Professor of Criminal Justice at the University of Cincinnati and Director of the University of Cincinnati Policing Institute, Data will never prove or disprove racially biased policing, we contend that vehicle stop data collection and analysis should never be viewed-either by police or resident stakeholders-as a pass fail test. Rather, it should be viewed as a diagnostic tool to help pinpoint the decisions, geographic areas, and procedures that should get priority attention when the agency, in concert with concerned residents, identifies its next steps for addressing the problem or perception of racial profiling (2008, pp. 1-36). Institutional racism consists of the day-to-day practices of an organization that have a harmful impact on members of a subordinate group (Kendall, Nygaard, Thompson, 2011) and delivered at the macro-level. In order for the argument of systematic racial profiling by the Toronto Police Service to be true, the Service would have to have policies or procedures in place that sanctioned it. In fact, the Toronto Police Service does not sanction any form of racial profiling by its members. The Service has numerous rules and procedures that prohibit racial profiling along with a Diversity Management Unit that monitors all human rights complaints and ensures that all members provide a bias-free service to the community (2009). Members of the Toronto Police Service are also being constantly reminded their responsibility in providing a bias-free service to the community. These reminders are done through training and education, the Services Core Values and letters to the members of the Service, such as a letter written in 2003 by then Chief Juilian Fantino who wrote; we must be aware that social and institutional pressures can lead to unacceptable instances of racial bias in policing. Police officers must make their decisions to engage the public based on the actions or conduct that they observe, on actual witness information and/or on hand evidence. Police officers must have articulable cause or reasonable grounds in order to pursue legitimate law enforcement activities with a member of the public. We must not make any decision to stop, question and/or search citizens based solely on a persons race. All of us, at all times, must provide equitable and respectful service to all persons regardless of race. I believe that the best way to deal with this and all other issues is simply by always treating people, all people, professionally. Lets continue to treat all people and each other with dignity and respect. Professional conduct means that we will never go wrong or be found wanting in our dealings with all components of our diverse society (Toronto Police Service, 2003). To ensure that members of the Toronto Police Service are not racially profiling the Toronto Police Service is working in partnership with the Ontario Human Rights Commission to ensure the Services hiring practices reflect the diversity of the City of Toronto, training officers in ethics, and diversity and how to recognize racial bias policing (2009) Although the Toronto Police Service does not systematically racially profile, they do systematically criminally profile. Criminal profiling also known as Criminal Investigative Analysis (CIA) is an effective tool enabling law enforcement agencies to enforce the law more effectively (Royal Canadian Mounted Police). The origins of criminal profiling can be traced back to 1800s when it was first used in case to identify Jack to Ripper (Winerman, 2004, p. 66). The current use of criminal profiling by law enforcement was developed the Federal Bureau of Investigation (FBI), in the United States by their Behaviour Science Unit (Ibid). The uses of this technique has also with stood the threshold of law and been recognized as a valid investigative technique. Criminal profiling involves a multidisciplinary approach that examines and understands criminal behaviour using many sociological perspectives. Functionalist perspective view crime as a result of the lack moral order within a society which is necessary to hold society together (Kendall, Nygaard, Thompson, 2011). Conflict perspective suggests that disadvantage groups are more likely to become criminals than those who are privileged. It also sees higher-income citizens being able to hide their criminal acts better and punished differently then disadvantage groups, if caught. Symbolic interactionist perspective helps us understand how people learn to become criminals and how being labelled a criminals can increase the probability that the person will engage in criminal behaviour (Ibid). Each perspective traces criminal behaviour to social conditions rather than to the individuals race, sex, ethnicity or disability. Criminal profiling can be broken into two stages; the first could be described as general profiling and the second as specific profiling (Palermo, 2002, pp. 383-385). General profiling is part of an officers everyday duties and investigations of any crime, such as traffic stops, while specific profiling is more refined in the officers approach to evidence and crime scene investigations (Ibid). Criminal profiling can also take on several forms. The first form of criminal profiling can be institutional, which is where the organization develops the profile of the offender, while the second for can be formed by the individual officer. This form of criminal profiling is developed by the officer from his or her own experiences (Higgins Gabbidon, 2009, pp. 77-88). In todays policing, Toronto Police Service front-line officers incorporated the general profiling aspect of criminal profiling when performing their general duties but will on occasion incorporate specific profiling aspects when responding to a serious radio call. The officers will also use both institutional and individual forms of criminal profiling as well. A basic form of institutional criminal profiling is taught to members of the Toronto Police Service when he or she attends the Ontario Police College as a basic recruit. The recruits are provided the necessary knowledge of laws, procedures and skills that will help them perform their duties as frontline officers. With emphasis on the core function of police services found in the Ontario Police Service Act section 4(2) which focuses on Crime Prevention, Law Enforcement, Assistance to Victims of Crime, Public Order Maintenance, and Emergency Response (2009). The officers are also provided training a variety of subjects including, ethics, anti-racism and community policing (Ibid). The training does not stop when a officer leave the Ontario Police College, the officers are further trained at the Toronto Police College in the Services Rule and Procedures, Core Values and Mission Statement of the Service along with officer safety training. Officers develop individual criminal profiling skills when they start patrolling the streets of Toronto. The officer will respond to thousands of calls varying from thefts, domestics, fights, to vehicle stops. Each time the officer interacts with the individuals, he or she develops their own brand of policing and individual criminal profiling techniques. In community policing, officers work closely with problem communities, in developing strategies to help the community combat crime. Working with the community, officers receive information from residences on potential criminal activities and individuals within the community, so that they can develop strategies to reduce crime. Officers will incorporate all aspects of criminal profiling to either be reactive or proactive in an attempt to reduce criminality. Being reactive, officers focus their attention on direct information that is received from the community to reduce the current problem within the community, while proactive policing allows the officers to profile activities and individuals within the community to prevent further victimization. Officers also use criminal profiling when they perform traffic stops. The officer use individual criminal profiling when he or she selects an area to monitor the traffic flow, which is based on the officers personal experience. The officer might select an area where there is a high rate of incidences of failing to stop at a sign or a section or roadway where vehicle speed. When the officer decides to stop the vehicle for a violation of the Highway Traffic Act, he or she again criminally profiles the vehicle and occupants for officer safety reasons. The officer will conduct registration checks on the vehicle and the registered owner, all the time observing the occupants of the vehicle before stopping the vehicle, in order identify any criminal activity. This part of criminal profiling it taught to the officers by the Ontario Police College and the Toronto Police College (institutional criminal profiling) as part of the Officers Safety Section within both colleges, in order to keep the officer safe. There are those who argue that criminal profiling is not supported by scientific evidence and should be dismisses as rhetoric and never be used. This paper agrees that criminal profiling is limited in empirical data but is still a useful tool to combat crime. According to a research study which states, criminal profiling will persist as a pseudoscientific technique until such time as empirical and reproducible studies are conducted on the abilities of large groups of active profilers to predict, with more precision and greater magnitude, the characteristics of offenders (Snook, Eastwood, Gendreau, Goggin Cullen, 2007, pp. 437-453). In conclusion, it is important to rethink racial profiling through the lens of criminal profiling and to reduce race to the role that it is purportedly playing in racial profiling, namely a predictive factor; to treat race no differently than we would gender, class, age, or any other profile that works; to take the focus away from race and place it on criminal profiling more generally. Rethinking racial profiling through the lens of criminal profiling actually sheds light on police practices. The Toronto Police Service does not systematically racially profile as the media, social and minority groups would have us believe. In order for the Toronto Police Service to be blamed for systematically racially profiling, the Service would have to be a plan or procedure in place to support it. The Toronto Police Service does not support any form of racial profiling by it members Criminal profiling plays a crucial and significant role in deterring and combating criminal behaviour and activity. Criminal profiling provides a valuable tool for police in which they can assess and analyze the patterns of criminal behaviour (Turvey, 2008, pp. 1-43). The Toronto Police Service systematically criminally profiles and treats the race component of criminal profiling no differently than they would gender, class, age, or any other profile that works.

Black Man Standing :: essays research papers fc

Black Man Standing: The Media’s Portrayal of African-American Men Documentation Style: MLA Name and Description of Target Audience: Readers of the Chicago Tribune Guest Editorial Section Forum/Genre Paper Would Take in Target Publication: Guest Editorial in the Chicago Tribune Brief Description of Assignment and Instructor Expectations for Critical Thinking: 4 page paper with a 2 source minimum, evaluating media in the terms of values it reinforces or resists, and the consequences this has on specific subgroups or cultures. The media has a powerful influence in the everyday thoughts and lives of Americans. Most Americans wake up in the morning and turn on the TV to see what’s going on in the world as they get ready for work; pick up a newspaper and read it with breakfast; turn on the radio and listen to it in their car on the way to work or school; or we do a combination of the three. The people in charge of the media are also in charge, to a great degree, of how we perceive our world. We can sort through our own thoughts and make our own opinions, but we get our information from the media, and the media decides what to show us in the first place. We look to the media to tell us what is important, what we need to know. We also look to the media for our entertainment. It’s important for us to realize all the roles that media has in our lives and to what extent we are influenced by it, because the media is also responsible for our cultural stereotypes and values.   Ã‚  Ã‚  Ã‚  Ã‚  One major example that I will focus on here is the way that black males are represented. Black men are consistently being portrayed by the media to fit into narrow, stereotypical roles. They are being shown to be less complex, and two dimensional as opposed to the broader range of Caucasian roles and depictions that the media exemplifies. I think this is of great consequence to society, because it effects not only how society perceives black men, but also how black males perceive themselves, and how they think they are supposed to act and be.   Ã‚  Ã‚  Ã‚  Ã‚  Black men are shown less often in the media, especially on primetime TV, but when they are shown you can almost always fit them into one of three categories; 1.) Comedian, 2.) Angry/Jaded, or 3.) Gangster/Thug. Do we as the viewers ever ask ourselves why black males seem to be getting so embarrassingly over-typecast?

Betty Smith :: essays research papers

Betty Smith Betty Smith was born Elisabeth Wehner on December 15, 1896. The daughter of German immigrants, she grew up poor in Brooklyn, a world where she re-creates in â€Å" A Tree Grows in Brooklyn.† Wehner later on married fellow Brooklynite George H.E. Smith, where they moved to Ann Arbor, Michigan, where he was a law student at the University of Michigan. The bride son had two daughters, Nancy and Mary, and had to wait until the girls entered school before endeavoring to complete her own education. Although Smith never finished high school, she was permitted to take classes at the university, she focused on her studies in journalism, drama, writing and literature. Smith showing off her knowledge won the Avery Hopkins Award for work in drama, and had a three-year course in playwriting at the Yale Drama School. After writing features for a Detroit newspaper, reading plays for the Federal Theatre Project, and acting in summer stock, Smith than moved to Chapel Hill, North Carolina under the favors of the W.P.A. She and her first husband divorced in 1938. In 1943, she married Joe Jones, a writer, journalist, and associate editor of the Chapel Hill Weekly, while he was serving as a private in the wartime army. That same year, â€Å" A Tree Grows in Brooklyn,† her first novel, was published. The prestige of writing a best-selling, critically lauded a book brought assignments from the New York Times Magazine, which she wrote both light-hearted and serious commentary. In a December 1943 piece called â€Å"Why Brooklyn is that Way,† Smith shown the core of her childhood borough’s unofficial champion. Although most readers remembered for the amazing success of that first book, Smith wrote other novels, including Tomorrow Will Be Better, Maggie-Now, and Joy in the Morning.

Ellen Foster Essay -- essays papers

Ellen Foster The majority of families were once considered perfect. The father went to work everyday, while the mother stayed at home and cared for her two children, â€Å"Henry† and â€Å"Sue†. The children never fought and the parents were involved in all the community events. Our society has grown to accept that there is no such thing as a perfect family. Eleven-year-old Ellen from the book Ellen Foster, by Kaye Gibbons, grows up in a household where her father is an abusive alcoholic and her mother is too sick to complete everyday tasks. By using her positive assets, and learning from her negative assets, Ellen was able to overcome a lot of challenges throughout the book. One would think that six of the most important external assets fall under the category of support. Without support from one’s family and friends, he/she would have to be living in a state of depression. Ellen can claim to have only two of the support assets, which are to be in a caring school environment and to receive support from three or more nonparent adults. In school, her teachers worry about her, and want to know if she is OK: â€Å"The first day back at school my teacher noticed a bruise he put on my arm†¦ she asked me if I had somewhere to spend the night†¦the teacher says everything is OK and she will make the necessary arrangements†. Although Ellen found support from the school psychologist, she also found support from her best and only friend Starletta’s parents. Starletta’s parents told Ellen, â€Å"You come on back when you want to†¦ If he’s there when you get home you come on back here if you want to†¦Ã¢â‚¬  Starletta’s parents are very understanding and they even take Ellen downtown whenever she needs to, buy clothing or food. Even though Ellen found sup... ...family that she grew up in was such a negative environment. It is very possible that she will grow up to be an art teacher. One might think this because she looked up to her art teacher so much and admired her; Ellen’s mind is full of creativity and ideas. When Ellen’s school found out that her dad was abusive to her they put her up at her art teacher’s house. Ellen says â€Å"I came a long way to get here but when you think about it really hard you will see that old Starletta came even farther†¦ And all this time I thought I had the hardest row to hoe† Like Ellen did, it is important for everyone to look back into their life and see what they have learned. Doing so cannot change ones past but only add to their future. Ellen will always carry the horrors of her childhood with her but by using all of her assets that she gained throughout the book her future can be enriched.

South-Western Federal Taxation: Comprehensive Volume

CHAPTER 21 PARTNERSHIPS SOLUTIONS TO PROBLEM MATERIALS | | | | |Status: | Q/P | |Question/ |Learning | | |Present |in Prior | |Problem |Objective |Topic | |Edition |Edition | | | | | | | | | | | | LO 1Partnership definitionNew 2LO 2General partnership versus LLCNew 3LO 1Check-the-box regulationsNew 4LO 2Partnership tax reportingModified1 5LO 2Analysis of Income scheduleModified1 6LO 2Partnership Schedule M-3New 7LO 3Special allocationsNew 8LO 3Capital accountsNew 9LO 3Inside versus outside basisNew 10LO 4Comparison of corporate and partnershipUnchanged2 treatment 11LO 4Application of  § 721New 12LO 4Exceptions to  § 721New 13LO 4Disguised sale issue recognitionUnchanged4 14LO 5Initial costs of a partnershipNew 15LO 6Cash accounting method for partnershipsNew 16LO 7Economic effect testUnchanged8 7LO 8Adjustments to partner’s basisUnchanged9 18LO 8Liability allocations to basisUnchanged10 19LO 10Guaranteed paymentsNew 20LO 8, 9, 14Partnership advantages and disadvantagesUn changed12 21LO 4, 6, 7,Partnership formation and operationsUnchanged13 8, 9, 10issues 22LO 11Basis in distributed propertyUnchanged14 23LO 11Distribution ordering rules; liquidatingNew versus nonliquidating distributions 24LO 11Conceptual: tax results of distributionsNew 25LO 12Ramifications of sale of a partnership interestNew Instructor: For difficulty, timing, and assessment information about each item, see p. 1-4. | | | | |Status: | Q/P | |Question/ |Learning | | |Present |in Prior | |Problem |Objective |Topic | |Edition |Edition | | | | | | | | | | | | 6LO 4Formation of partnership; inside and basisUnchanged15 27LO 4, 14Formation of partnership; inside and outsideUnchanged16 outside basis 28LO 4Contribution of various properties onUnchanged17 formation of a partnership; basis and depreciation 29LO 4Formation of a partnershipNew 30LO 4Formation of a partnershipNew 31LO 4, 8, 14Basis of property received as gift; receipt Modified19 of interest for services 32LO 8, 14Planning fo r service interestsNw 33LO 4, 10, 14Disguised sale versus distributionUnchanged20 *34LO 4, 7Treatment of contributed propertyNew 5LO 5Tax issues related to formation ofUnchanged5 partnership 36LO 4, 5, 6,Preparation of initial LLC tax returnUnchanged6 37LO 6Accounting methodsUnchanged7 *38LO 5Definition of organization costs;Unchanged21 amortization of organization costs *39LO 6Computation of partnership’s required taxUnchanged24 year under the least aggregate deferral method 40LO 4, 7Date basis of partner’s interest; gain on saleUnchanged25 of contributed land with precontribution built-in gain 41LO 7Date basis of partner’s interest; loss on saleUnchanged26 of contributed land *42LO 7, 8Computation of partner’s outside basis atModified27 beginning and end of year when several transactions took place *43LO 7, 8Partnership income; partner’s basis;Modified28 separately stated items; guaranteed payments 44LO 7, 8, Partnership income; partner’s basis; lossModified29 10,limitations; guaranteed payments 45LO 4, 7, 8Partnership’s income and separately statedUnchanged30 items; partner’s basis and amount at risk 6LO 4, 7, 8Same as Problem 45 for an LLCModified31 47LO 7, 8, 9,Basis and loss limitationsUnchanged32 *48LO 4, 7, 8,Allocations under  § 704(b)Modified33 9 49LO 7, 8, 9Allocation of gain under  § 704(b)Modified33 50LO 7, 8, 9Allocations to partner; basis in interest; Unchanged34 loss limitations 51LO 8Allocation of recourse debtUnchanged35 52LO 4, 8Sharing recourse debt for basis purposesUnchanged36 Instructor: For difficulty, timing, and assessment information about each item, see p. 21-4. | | | |Status: | Q/P | |Question/ |Learning | | |Present |in Prior | |Problem |Objective |Topic | |Edition |Edition | | | | | | | | | | | | 3LO 8, 9, 14Basis calculations and loss limitationsUnchanged11 54LO 8, 9Loss disallowance under  § 704(d),  § 465,Unchanged37 and  § 469 55LO 7, 10Timing of recognition of guaranteedModified38 payments 56LO 10Timing of recognition of guaranteed New payments, continued *57LO 7, 10Comparison of C corporation salary versus Unchanged39 partnership guaranteed payment 58LO 10Disallowed  § 267 loss from sale of propertyUnchanged40 to partnership by partner; conversion f capital gain to ordinary income from sale of investment property to partnership by partner 59LO 11Nonliquidating distribution; basis of New assets distributed (limited); partner’s outside basis 60LO 11Nonliquidating distribution; basis of New assets distributed (limited); partner’s outside basis *61LO 11Nonliquidating distributions; amount andModified43 nature of gain or loss; basis of assets distributed; partner’s outside basis *62LO 11Allocation of basis to multiple assetsUnchanged44 distributed 3LO 11Effect of change in partner’s share of New liabilities; nonliquidating versus liquidating distributions 64LO 11Results of various liquidating distributionsUnch anged45 65LO 12Sale of partnership interest; amount andModified46 nature of gain or loss; basis of new partner’s interest; election to adjust basis of partnership property *The solution to this problem is available on a transparency master. Instructor: For difficulty, timing, and assessment information about each item, see p. 21-4. | | | |Status: | |Q/P | | Research | | | |Present | |In Prior | |Problem | |Topic | |Edition | |Edition | | | | | | | | | 1Economic effect allocationsUnchanged1 2Allocation of liabilitiesNew Internet activityUnchanged3 | | |Est'd | |Assessment Information | | |Question/ | |completion |AICPA* | AACSB* | |Problem |Difficulty |time |Core Comp | Core Comp | | | | | | | | | | 2 |Easy | |10 |FN-Reporting |Analytic | | 3 | |Easy | |10 |FN-Reporting |Analytic | | 4 | |Easy | |10 |FN-Reporting |Analytic | | 5 | |Medium | |10 |FN-Reporting |Analytic | | 6 | |Medium | |10 |FN-Reporting |Analytic | | 7 | |Easy | |10 |FN-Reporting |Analytic | | 8 | |Medium | | 10 |FN-Reporting |Analytic | | 9 | |Easy | |10 |FN-Reporting |Analytic | | 10 | |Medium | |10 |FN-Reporting |Analytic | | 11 | |Easy | |10 |FN-Reporting |Analytic | | 12 | |Medium | |10 |FN-Reporting |Analytic | | 13 | |Medium | |10 |FN-Measurement | FN-Reporting |Analytic | Reflective Thinking | | 14 | |Medium | |10 |FN-Reporting |Analytic | Reflective Thinking | | 15 | |Medium | |10 |FN-Reporting |Analytic | | 16 | |Easy | |10 |FN-Reporting |Analytic | | 17 | |Easy | |10 |FN-Measurement |Analytic | | 18 | |Medium | |10 |FN-Measurement | FN-Reporting |Analytic | | 19 | |Easy | |10 |FN-Reporting Analytic | | 20 | |Medium | |10 |FN-Measurement | FN-Reporting |Analytic | | 21 | |Medium | |15 |FN-Reporting |Analytic | | 22 | |Easy | |10 |FN-Measurement | FN-Reporting |Analytic | | 23 | |Easy | | 5 |FN-Measurement | FN-Reporting |Analytic | | 24 | |Easy | | 5 |FN-Measurement | FN-Reporting |Analytic | Reflective Thinking | | 25 | |Medium | |10 |FN-Measurement | FN-Reporting |Analytic | Reflective Thinking | | 26 | |Easy | |10 |FN-Measurement | FN-Reporting |Analytic | | 27 | |Medium | |10 |FN-Measurement | FN-Reporting |Analytic | Reflective Thinking | | 28 | |Easy | |10 |FN-Measurement | FN-Reporting |Analytic | | 29 | |Easy | |10 |FN-Measurement | FN-Reporting |Analytic | | 30 | |Medium | |10 |FN-Measurement | FN-Reporting |Analytic | | 31 | |Hard | |15 |FN-Measurement | FN-Reporting |Analytic | Reflective Thinking | | | |*Instructor: See the Introduction to this supplement for a discussion of using AICPA and AACSB core competencies in assessment. | | 32 | |Medium | |10 |FN-Reporting |Analytic | Reflective Thinking | | 33 | |Medium | |15 |FN-Measurement | FN-Reporting |Analytic | Reflective Thinking | | 34 | |Medium | |15 |FN-Measurement | FN-Reporting |Analytic | | 35 | |Medium | |10 |FN-Measurement | FN-Reporting Analytic | Reflective Thinking | | 36 | |Medium | |10 |FN-Measurement | FN-Reporting |Analytic | Reflective Thinking | | 37 | |Medium | |10 |FN-Repo rting |Analytic | | 38 | |Medium | |10 |FN-Measurement | FN-Reporting |Analytic | | 39 | |Medium | |10 |FN-Reporting |Analytic | | 40 | |Medium | |15 |FN-Measurement | FN-Reporting |Analytic | | 41 | |Medium | |15 |FN-Measurement | FN-Reporting |Analytic | | 42 | |Medium | |20 |FN-Measurement | FN-Reporting |Analytic | | 43 | |Hard | |15 |FN-Measurement | FN-Reporting |Analytic | | 44 | |Hard | |15 |FN-Measurement | FN-Reporting |Analytic | | 45 | |Medium | |15 |FN-Measurement | FN-Reporting |Analytic | | 46 | |Medium | |15 |FN-Measurement | FN-Reporting |Analytic | | 47 | |Medium | |15 |FN-Measurement | FN-Reporting |Analytic | | 48 | |Medium | |10 |FN-Measurement | FN-Reporting |Analytic | Reflective Thinking | | 49 | |Hard | |10 |FN-Measurement FN-Reporting |Analytic | | 50 | |Hard | |15 |FN-Measurement | FN-Reporting |Communication | Analytic | | 51 | |Medium | |10 |FN-Measurement | FN-Reporting |Analytic | | 52 | |Hard | |15 |FN-Measurement | FN-Reporting |Communication | Analy tic | | 53 | |Medium | |15 |FN-Measurement | FN-Reporting |Analytic | Reflective Thinking | | 54 | |Hard | |15 |FN-Measurement | FN-Reporting |Communication | Analytic | | 55 | |Medium | |10 |FN-Measurement | FN-Reporting |Analytic | | | |*Instructor: See the Introduction to this supplement for a discussion of using AICPA and AACSB core competencies in assessment. | 56 | |Medium | |10 |FN-Reporting |Analytic | | 57 | |Medium | |10 |FN-Measurement | FN-Reporting |Analytic | | 58 | |Easy | |10 |FN-Measurement | FN-Reporting |Analytic | | 59 | |Medium | |10 |FN-Measurement | FN-Reporting |Analytic | | 60 | |Medium | |10 |FN-Measurement | FN-Reporting |Analytic | | 61 | |Medi m | |10 |FN-Measurement | FN-Reporting |Analytic | | 62 | |Medium | |10 |FN-Measurement | FN-Reporting |Analytic | | 63 | |Medium | | 5 |FN-Measurement | FN-Reporting |Analytic | | 64 | |Medium | |15 |FN-Measurement | FN-Reporting |Analytic | | 65 | |Medium | |15 |FN-Measurement | FN-Reporting |Analytic | | | |*I nstructor: See the Introduction to this supplement for a discussion of using AICPA and AACSB core competencies in assessment. | CHECK FIGURES 26. a. $0; $0. 26. b. $200,000. 26. c. $100,000. 26. d. $100,000 basis in property. 27. a. ($15,000) realized; $0 recognized. 27. b. $60,000. 27. c. $75,000. 27. d. $75,000. 27. e. Sell and contribute cash. 28. a. $20,000 on land; $60,000 on equipment. 28. b. No gain under  § 721. 28. c. Carol $70,000; Connie $30,000. 28. d. $40,000 basis in land; $30,000 basis in equipment. 28. e. Inside = Outside = $100,000. 28. f. Partnership continues Connie’s depreciation schedule. 29.No gain or loss to Justin, Tiffany, or partnership; Justin’s basis $85,000; Tiffany’s basis $125,000; partnership’s basis in land $65,000; partnership steps into Tiffany’s shoes for depreciation. 30. Tiffany recognizes $25,000 loss on sale; basis is $100,000. Partnership must spend additional $10,000 to acquire assets. 31. a. $0. 31. b. $ 50,000. 31. c. $25,000 ordinary income. 31. d. $75,000. 32. b. Contribute ‘‘property’’ of ‘‘permits’’ and ‘‘development plan’’ completed before contribution. 33. a. Distribution. 33. b. $0 gain or loss. 33. c. $50,000. 33. d. Disguised sale. 33. e. $16,667. 33. f. $66,667. 34. a. Rachel $360,000; Barry $600,000. 34. b. 170,000 ordinary income. 34. c. $100,000 capital loss and $20,000 ordinary loss. 35. Organization costs $10,000 (deducted); start-up costs $60,000 (amortized over 180 months); property acquisition costs $24,000 (added to property basis; depreciated as newly acquired asset); syndication costs $1 million (nondeductible). 36. Issues include partnership year end; partnership accounting method; treatment of initial costs; partners’ bases in LLC interests; LLC’s basis in property received on formation; interests issued in exchange for services; built-in gain on later sale of land. 37 . BR can use cash, accrual, or hybrid method in 2008, 2009, and 2010.In 2011 and later years, BR may no longer use cash method. 38. a. Organizational costs: $8,000; syndication costs $10,000. 38. b. $5,000 deduction plus $50 amortization of organization costs. 38. c. 180-month amortization. 39. January 31. 40. a. $75,000. 40. b. Five years. 40. c. $15,000 gain. 41. a. $36,000 loss; $30,000 to Reece and remaining $6,000 allocated equally among partners. 42. a. $160,000. 42. b. $230,000. 43. a. $42,000; qualified dividends $4,000. 43. b. $29,000 basis. 43. c. $22,000 basis. 44. a. ($18,000); qualified dividends $4,000. 44. b. $0 basis; $8,000 loss deductible currently, $1,000 suspended. 44. c. $0 basis; $1,000 loss allowed; $8,000 suspended. 45. a. 175,000 (Celeste); $125,000 (Ernestine). 45. b. Ordinary income $80,000; qualifying dividend $3,000; tax-exempt interest $1,000; charitable contribution $500; distribution to Celeste $20,000. 45. c. $283,500 basis and at-risk amount. 46. a. Accounts payable are nonrecourse for LLC. 46. b. $283,500 basis; $233,500 amount at risk. 47. a. $24,000. 47. b. $4,000. 47. c. $0. 47. d. $4,000. 47. e. Don can contribute capital or partnership can incur debt. 48. a. Year 1—Fred $49,600; Manuel $78,400. Year 2—Fred $960; Manuel $75,840. 48. b. Yes. 49. a. Gain $43,200 allocated equally. Basis—Fred $22,560, Manuel $97,440. 49. b. Fred’s cash $22,560; Manuel’s cash $97,440. 49. c.Tax savings now or cash later; not both. 50. Deduct $54,000 of loss unless basis increased before year-end. 51. Melinda $6,000; Gabe $6,000; Pat $18,000. 52. Paul $160,000; Anna $80,000. 53. a. Basis adjustment rules per Figure 21. 3; then loss limitation rules [ § 704(d),  §Ã‚  465, then  § 469]. 53. b. $5,000 gain, $0 basis. 53. c. No loss deduction. 53. d. Make distribution next year so Brad can deduct loss this year. Partnership can incur additional debt. 54. $48,000 deducted. $14,000 suspended— § 704(d ); $8,000 suspended— § 469. 55. a. $70,000 in 2010, incl. guaranteed payment. 55. b. $25,000 in 2010. 56. $70,000. 57. a. $55,000 salary in 2010. 57. b. 0 in 2010; $40,000 partnership income and $60,000 guaranteed payment in 2011. 58. a. $0. 58. b. $10,000. 58. c. $80,000 gain; may be ordinary. 59. a. $0. 59. b. $0. 59. c. Inventory $60,000; land $75,000; partnership interest $185,000. 60. a. $0. 60. b. $0. 60. c. Account receivable $0; land $20,000; partnership interest $0. 61. a. $15,000 gain and basis in partnership interest $0; partnership $0 gain. 61. b. Land $30,000 basis and basis in partnership $10,000; partnership $0 gain. 61. c. No gain or loss; land basis $12,000; basis in partnership interest $0. 61. d. $10,000 gain; $0 basis in inventory; $0 basis in partnership interest. 62. a. No gain or loss. 62. b. 6,000 in item 1 and $3,000 in item 2. 63. a. Inventory basis $10,000; basis in partnership interest $20,000. 63. b. Recognized loss $20,000; Inventory basis $10, 000. 64. a. $15,000 capital gain. 64. b. No gain or loss; $40,000 basis. 64. c. No gain or loss; inventory $10,000; capital asset $22,000. 64. d. $0 basis in accounts receivable; $60,000 capital loss. 65. a. $100,000 realized. 65. b. $30,000 ordinary income. 65. c. $20,000 capital gain. 65. d. $100,000 basis. DISCUSSION QUESTIONS 1. A partnership is an association of two or more persons (including individuals, trusts, estates, corporations, other partnerships, etc. ) formed to carry on a trade or business.Each partner contributes money, property, labor or skill, and each expects to share in profits and losses. The entity must not otherwise be classified as a corporation, trust, or estate. p. 21-3 2. In a general partnership, all partners are â€Å"general partners† who are jointly and severally liable for partnership debts, including liabilities arising from tort or malpractice judgments against the general partnership. A general partner bears liability for these debts even i f the partner was not personally involved in the malpractice. A limited liability company has the corporate attribute of limited liability for the owners (called â€Å"members† in an LLC), but an LLC is treated as a partnership for tax purposes.In a properly-structured LLC, none of the members are personally liable for entity debts. State law governs the types of entities that may be established as LLCs. Most states permit capital-intensive entities to use this form of business, but they do not permit personal-service entities to be treated as LLCs. pp. 21-3 and 21-4 3. By default, a newly-formed noncorporate entity with two more owners is treated as a partnership under the check-the-box Regulations. The entity may â€Å"check-the-box† on Form 8832 to elect, instead, to be taxed as a corporation. p. 21-4 4. A partnership is not a tax-paying entity; however, it must still file a tax return.The partnership reports its income and expenses on Form 1065. Partnership income is comprised of income from operations and separately stated income and expenses. The income and expenses from operating activities are reported on Page 1 of the Form 1065. A separately stated item is any item (income or expense) that could differently affect the tax liabilities of different partners. Separately stated items are reported in the partnership return on Schedule  K. The partners must pay the tax on the partnership income. The partnership’s income and separately stated items are reported to each partner on a Schedule K-1 prepared for that partner. pp. 21-4 to 21-7 5.Because it is not a tax-paying entity, a partnership does not report â€Å"taxable income. † However, it must still reconcile between the tax return and the books. The partnership prepares the Analysis of Net Income (Loss) (page 5 of Form 1065) to determine what might be called the partnership’s â€Å"taxable income equivalent. † Certain amounts shown on Schedule K are netted and entered on the Net Income (loss) line of this Analysis. This â€Å"taxable income equivalent† is reconciled to book income on Schedule M-1 or Schedule M-3 of the partnership’s return. This is similar to the corporate reconciliation (also on Schedule M-1 or M-3) in Form 1120; however, for a partnership, the â€Å"taxable† amount must be derived as described above. pp. 1-5 to 21-7 6. Schedule M-3 is filed (in lieu of Schedule M-1) by â€Å"larger† partnerships to report a detailed reconciliation between the partnership’s book and tax income. In addition, these partnerships must file Schedule C to answer various questions regarding the partnership’s changes of ownership, reporting, or other activities during the year. This reconciliation is designed to highlight differences between GAAP basis reporting (per an SEC filing or an audited financial statement) and tax basis income. A partnership is generally required to file Schedule M-3 if it has $10 million or more in assets or $35 million or more in total receipts.In addition, it must file Schedule M-3 if any partner owns a 50%-or-greater interest in partnership profits, losses, or capital, and if that partner meets either the $10 million (assets) or $35 million (receipts) threshold. pp. 21-6 and 21-7 7. A special allocation is an amount that is allocated differently from the general profit or loss sharing ratios specified in the partnership agreement. For pre-contribution gain or loss property, special allocations are required to be made to eventually bring the partners’ tax bases in line with their book-value capital accounts. Orange, LLC, can offer a preferential special allocation of profits and cash flows to Green to compensate the company for use of its capital.The LLC can offer a guaranteed payment (rather than a special allocation) to Rose for her managerial time and expertise. Upon sale of the appreciated property contributed by Rose,  §Ã‚  704(c) require s the precontribution gain to be allocated to her. pp. 21-8, 21-24, and 21-36 8. A partner’s capital account is a mechanical determination of the partner’s financial interest in the partnership, as determined using one of several possible accounting methods, including tax basis, GAAP,  §Ã‚  704(b) book basis, or some other method defined by the partnership. The capital account reflects contributions and distributions of cash or other property to or from the partner.In addition, it accumulates the partner’s share of increases and decreases from operations, including amounts that are otherwise tax-exempt or nondeductible. Even if capital accounts are determined on a tax basis, a partner’s capital account usually will differ from the partner’s basis in the partnership interest because (among other reasons) the capital account does not include the partner’s share of partnership liabilities. p. 21-8 9. The â€Å"inside basis† is the part nership’s tax basis for the assets it owns. The â€Å"outside basis† is a given partner’s tax basis in the partnership interest. On formation of a partnership, the total of all partners’ outside bases will equal the partnership’s inside bases of all of its assets. p. 21-8 10.As a general rule, both  §Ã‚ §Ã‚  721 and 351 provide that no gain or loss is recognized when property is transferred on the formation of a partnership or corporation. However,  §Ã‚  351 applies only if those persons transferring property to a corporation are in control of the corporation immediately after the exchange, whereas  §Ã‚  721 does not include a control requirement. Section 721 not only applies to initial transfers in forming the partnership but to all subsequent contributions from any partner. Similarities exist between  §Ã‚ §Ã‚  721 and 351 in that these nonrecognition provisions do not apply to all transfers made by the owners. Under  §Ã‚  721, the contr ibutor must receive an interest in the partnership, while under  §Ã‚  351, the transferor must receive stock in the corporation.Under both  §Ã‚ §Ã‚  721 and 351, if the transfer of property involves the receipt of money or other consideration, the transaction may be deemed a sale or exchange rather than a tax-free transfer. pp. 21-9 to 21-11, and Concept Summary 21. 1 11. In general, on formation of a partnership, no gain or loss will be recognized by either the partnership or the contributing partners [ §Ã‚  721]. Bobbi will not recognize the realized gain related to the land she is contributing. Similarly, BC will not recognize a gain or loss. Bobbi’s basis in the land will carry over to BC. Bobbi’s basis in BC will be a substituted basis equal to her basis in the contributed land. If the land Bobbi contributes is ever sold by BC, the precontribution gain must be allocated to Bobbi [ §Ã‚  704(c)]. pp. 21-9, 21-10, and Example 24 12.Under the general rule of à ‚ §Ã‚  721(a), no gain or loss is recognized on formation of a partnership. This rule does not apply in at least four situations. Realized gain or loss is recognized if: †¢ The entity is an investment partnership, †¢ The partner received the interest in the partnership in exchange for services, †¢ The transaction can be viewed as an exchange of properties (e. g. , properties are contributed to the partnership and soon thereafter are distributed to other partners with the intent of taking advantage of the basis rules of  §Ã‚  731 for distributed property), and †¢ The transaction can be viewed as a disguised sale of the property from the partner to the partnership or one of the other partners. pp. 21-10 to 21-11 13. a.If a contribution of property to a partnership is followed shortly thereafter by a distribution of cash to that partner, the IRS may recharacterize the transactions as a disguised sale of the property. In this case, Gerald would be treated as contri buting 75% of the property and selling the remaining 25% for cash [$60,000 sales price (distribution amount) ? $240,000 property value]. He would recognize $30,000 of gain on the deemed disguised sale [$60,000 deemed selling price less $30,000 basis ($120,000 ? 25%)]. b. The parties could use any of several techniques to minimize the possibility that the IRS will recharacterize the transaction as a sale. First, the distribution could be proportionate to all the partners. Second, the contribution should not be contingent on the later distribution of cash.Third, even if cash is required to ensure the contribution, the distribution should not be contingent on the partnership achieving a certain level of profits. Fourth, the distribution could be made in stages over a longer (say, three-year) time period. Here, it may be viewed as being a reasonable return of Gerald’s capital (e. g. , each $20,000 payment represents a 10% return on his capital). Finally, the distribution could be deferred until two years following the capital contribution. pp. 21-11, 21-12, and Example 12 14. In its initial year, a partnership will typically incur organizational and startup expenses. If property is contributed to the partnership, the entity may incur costs related to transferring the title of the property.If the partnership interests are sold to investors, the partnership might incur syndication costs. Once the partnership has started business, it will incur ordinary and necessary business expenses; these expenses are deductible under  §Ã‚  162. Organizational and startup costs are generally deductible to the extent of the first $5,000 of such costs. This deductible amount is reduced to the extent the total of such costs (in the respective category) exceeds $50,000. Any portion that is not deductible is amortized over 180 months, beginning with the month in which the partnership begins business. The cost of selling the partnership interests to investors is treated as a sy ndication cost under  §Ã‚  709. Such expenses are not deductible.The cost of transferring title to an asset is treated as an acquisition cost related to the asset; this amount will be treated as a new asset placed in service when incurred, and it will be depreciated using the same method and life as the underlying property. (If this underlying property was contributed by a partner, that property will be depreciated by continuing the depreciation schedule used by the contributing partner. The partnership â€Å"steps into the shoes† of the contributing partner in calculating depreciation deductions. ) pp. 21-15 and 21-16 15. A partnership may generally use the cash method of accounting unless it is a tax shelter or has one or more partners that are subchapter C corporations.The C corporation partner will not preclude use of the cash method of accounting if that corporation is a qualified personal service corporation or if it is engaged in the farming business. In addition, a subchapter C corporate partner will not preclude use of the cash method if the partnership has never had â€Å"average annual gross receipts† in excess of $5 million, for any year beginning in 1986 or later years. Average annual gross receipts is calculated by averaging the taxpayer’s gross receipts for the three years prior to the tax year in question or for the period of the taxpayer’s existence, if shorter. p. 21-17 16. The three rules of the economic effect test are designed to ensure that a partner bears the economic burden of a loss or deduction allocation and receives the economic benefit of an income or gain allocation.By increasing the partner’s capital account by the gain or income allocated to the partner, the rule ensures that a positive capital account partner will receive an allocation of assets equal to the balance in the partner’s capital account when the partner’s interest is eventually liquidated. If the partner has a negat ive capital account, an allocation of gain or income to the partner reduces the amount of the negative capital account and, therefore, the amount of the deficit capital contribution that is required from the partner upon liquidation. In short, a dollar of income or gain increases the partner’s capital account by a dollar and, everything being equal, the partner should receive a dollar more upon liquidation (or contribute a dollar less to restore a deficit in the capital account). Allocations of losses and deductions affect the partner in the opposite manner as income or gain.Therefore, the allocation of a dollar of loss or deduction reduces the partner’s capital account by a dollar and, everything being equal, reduces the amount the partner will receive upon liquidation (or increases by a dollar the partner’s deficit capital restoration requirement). p. 21-23 and Example 22 17. Under  § 722, a partner’s initial basis is determined by reference to the am ount of money and the basis of other property contributed to the partnership. This basis is increased by any gain recognized under  § 721(b) and the partner’s share of any partnership liabilities. Basis is decreased by any partner liabilities assumed by the partnership.Basis is also adjusted to reflect the effect of partnership operations: it is increased by the partner’s share of taxable and nontaxable income and is decreased by the partner’s share of loss and nondeductible/noncapitalizable expenses. Certain adjustments for depletion are also made. Finally, a partner’s basis is increased by additional contributions to the partnership and by increases in the partner’s share of partnership debt. Basis is decreased by distributions from the partnership and decreases in the partner’s share of partnership debt. A partner’s basis is adjusted any time it may be necessary to determine the basis for the partnership interest, for example, wh en a distribution was made during the taxable year, or at the end of a year in which a loss arises. A partner’s basis may never be reduced below zero (i. e. , no negative basis). Figure 21. 3 18.The partnership’s debts are allocated to the partners in determining the partners’ bases in their partnership interests. Any increase in partnership liabilities is treated as a cash contribution to the partnership, thereby increasing the partners’ bases. Any decrease in partnership liabilities is treated as a distribution from the partnership to the partners and decreases their bases. Partnership debt is allocated differently depending on whether it is recourse to the partners or nonrecourse. Recourse debt is allocated in accordance with the constructive liquidation scenario. Under this test, all partnership assets are deemed to be worthless.The losses that would arise are allocated to the partners according to the partnership agreement. The losses would create ne gative capital accounts for at least some of the partners; those partners are deemed to contribute that amount of cash (equal to the negative capital balance) to the partnership in settlement of the obligation to repay partnership’s recourse liabilities. The amount of that deemed capital contribution is the amount of the partner’s share of the recourse liabilities. Nonrecourse debt is allocated in a three-tier system. First, allocate any gain related to assets where the debt exceeds the partnership’s â€Å"book† basis in the assets. This is called minimum gain and is allocated according to the partnership agreement.Next, any debt related to any remaining precontribution gain is allocated to the partner who contributed the encumbered property to the partnership. Finally, any remaining debt is allocated in accordance with the method specified in the partnership agreement. pp. 21-28 and 21-29 19. A guaranteed payment is an amount paid to a partner for the pe rformance of services or for the use of the partner’s capital. These payments are in the nature of salary or interest payments that are made by other entities, but the tax treatment of guaranteed payments is somewhat different. Like payments made by other entities, guaranteed payments are generally deductible by the partnership, and can result in a loss to the entity. Guaranteed payments are taxed as ordinary income to the recipient partner.Unlike salary and interest payments made by other entities, guaranteed payments are treated as if they were received by the partner on the last day of the partnership’s tax year. If the partner and partnership have different tax years, there will be a deferral between the time the partnership claims the deduction and the time the partner reports the income. Guaranteed payments are treated as self-employment income by the recipient partner. pp. 21-36 and 21-37 20. A partnership is advantageous under any of the following conditions: à ¢â‚¬ ¢ Special allocations of income, expenses, cash flows, etc. can be made by the entity owners. †¢ The entity has taxable losses which the owners can utilize on their individual tax returns. †¢ The partnership generates net passive income which offsets passive losses of the owners. The entity operated as a Subchapter C corporation and would be required to report taxable income since other means of reducing such income (e. g. , interest, rents, salaries to owners) have been maximized and are not available. †¢ The entity cannot qualify under the requirements for a Subchapter S election (e. g. , too many shareholders, nonqualifying shareholders, more than one outstanding class of stock, etc. ) †¢ The entity will exist for only a short period of time and, if a corporation, its liquidation will result in a large tax due to the appreciation in its assets. †¢ Several other advantages may exist. The disadvantages of the partnership entity form arise when: The ent ity income is significant and will be taxed at higher individual rates than if accumulated in the corporation. †¢ The entity is in a high risk business and the owners require protection from personal liability. An LLC or LLP may be useful in such situations. pp. 21-51, 21-52, and Concept Summary 21. 5 21. a. False. The entity is required to file an information return, generally by the fifteenth day of the fourth month after the end of the partnership’s tax year. The return includes data concerning the partners’ allocable shares of the financial activities of the partnership. In addition, property, sales, and employment tax returns are likely to be required of the entity. p. 21-6 b. False.Generally no gain or loss is recognized, but there are exceptions to  § 721, including those pertaining to the receipt of boot, the contribution of property with liabilities in excess of basis, and the receipt of a partnership interest in exchange for services provided to the pa rtnership. pp. 21-10 and 21-11 c. False. The partner recognizes ordinary income, to the extent of the fair market value of the partnership interest that is received in this manner. p. 21-11 d. False. If property which was inventory in the hands of the transferor partner is sold by the partnership within five years of the date it was contributed, any gain will be treated as ordinary income, regardless of the manner in which the property was held by the partnership. p. 21-13 e. False. The partnership chooses tax accounting periods and methods that are applied to all of the partners. p. 21-15 f. False.An alternative tax year will never be required by the IRS; instead, the partnership must request permission from the IRS and may have to illustrate to the IRS that it has a business purpose for using an alternative tax year. p. 21-19 g. True. Built-in losses, as well as gains, must be allocated to the contributing partner when recognized by the partnership. pp. 21-24 and 21-25 h. True. pp . 21-27 to 21-29 i. True. p. 21-33 j. False. Such losses can be deducted by partners who hold a 50% or less ownership interest in the entity. p. 21-38 22. Generally, a taxable gain arises on a proportionate distribution only when cash is received in excess of the distributee partner’s basis in the partnership interest. As a relief of liabilities is treated as a distribution of cash, a decrease in a partner’s share of liabilities may also trigger a taxable gain.Similarly, certain distributions of marketable securities are treated as distributions of cash and can result in gain recognition. Other transactions, such as disguised sales and distributions related to precontribution gain property, might also result in gain recognition by the distributee partner. pp. 21-41 and Examples 51, 52 and 57 23. In either a current or liquidating distribution, assets are distributed in the following order: 1)  cash, 2) ordinary-income producing (hot) assets, and 3) other assets. Cash . In either a current or liquidating distribution, a cash distribution in excess of the partner’s basis triggers a gain (typically a capital gain). Cash (and certain items treated as cash) is the only asset for which a distribution might trigger a gain. Hot assets.In either a current or liquidating distribution, the partner’s basis in distributed hot assets equals the lesser of the partner’s basis in the partnership interest (after any cash distributions) or the partnership’s basis in the hot asset. In a liquidating distribution, the partner can claim a loss equal to any basis remaining after these hot assets are distributed, if no â€Å"other assets† will be distributed. In a current distribution, no loss can be deducted. Other assets. In a current distribution, â€Å"other assets† are treated similarly to hot assets: the basis equals the lesser of the partner’s basis in the partnership interest (after any cash and hot asset distribu tions) or the partnership’s basis in the asset. In a liquidating distribution, â€Å"other assets† absorb any remaining basis in the partnership interest after cash and hot assets are accounted for.For either a current or liquidating distribution, if â€Å"other assets† are distributed, the partner cannot recognize a loss. Examples 54, 57, 59, and 60 24. The partnership distribution rules reflect the aggregate theory of taxation. With respect to property ownership, the partner can be seen as an extension of the partnership. Ownership of property by the partner generally produces the same result as ownership by the partnership (and vice versa). The result is a carryover basis in distributed property with a preservation of the character of distributed property. The distribution rules operate with the goal of deferring tax on the distribution, while preserving the ordinary income potential.No gain or loss is recognized if an adjustment can be made to the basis of t he distributed property, without reducing the amount of ordinary income the partner will eventually recognize. So, gain is recognized if cash distributions exceed basis, because there is no asset for which the basis can be reduced. The basis of hot assets can be decreased, but not increased, in a distribution because the inherent ordinary income cannot be decreased. Similarly, loss can be recognized if only cash and â€Å"hot† assets are received in a liquidating distribution, because the basis in these types of assets cannot be increased to absorb the partner’s remaining basis. pp. 21-40 and 21-41 25.Jody must determine her gain or loss on the sale of the partnership interest. If the partnership owns â€Å"hot assets,† she must recognize ordinary income or loss to the extent of her proportionate share of the built-in appreciation or depreciation on these assets. Her remaining gain or loss is adjusted by the ordinary income or loss recognized. If the partnership ’s assets are substantially appreciated, Bill may wish to ask the partnership to make a  § 754 election so he can be allocated a step-up in basis. If the partnership has a substantial built-in loss (assets are depreciated by more than $250,000), the partnership may be required to make a step-down adjustment with respect to Bill’s acquired interest.If Jody sells more than a 50% interest in the partnership, or Bill is the sole remaining member of a two-owner partnership, the entity will terminate on the date the purchase is finalized. This may result in a loss of a favorable tax year or accounting method by the partnership. pp. 21-47 to 21-49 PROBLEMS 26. a. Under  § 721, neither the partnership nor the partners recognizes any gain on formation of the entity. b. Chip will take a cash basis of $200,000 in his partnership interest. c. Marty will take a substituted basis of $100,000 in his partnership interest ($100,000 basis in the property contributed to the entity). d. The partnership will take a carryover basis in the assets it receives ($200,000 basis in cash, and $100,000 basis in property). Example 14 27. a. Liz has a realized loss of $15,000.However,  § 721 contains the general rule that no gain or loss is recognized to a partnership or any of its partners upon the contribution of money or other property in exchange for a capital interest. Since Liz is subject to this rule, she does not recognize the loss. p. 21-10 b. $60,000. Section 722 provides that the basis of a partner’s interest acquired by a contribution of property, including money, is the amount of such money and the adjusted basis of such property to the contributing partner at the time of the contribution. p. 21-12 c. $75,000, the adjusted basis of the contributed property ( § 722). p. 21-12 d. $75,000. Under  § 723, the basis of property to the entity is the adjusted basis of such property to the contributing partner at the time of the contribution, increased by a ny  §Ã‚  721(b) gain recognized by such partner.Since no such gain (and no loss) was recognized by Liz on the contribution, the partnership takes a carryover basis in the property. Example 14 e. A more efficient tax result may arise if Liz sells the property to an unrelated party for $60,000, recognizes the $15,000 loss on the property, and contributes $60,000 cash to the partnership. The partnership could then use the $60,000 to acquire similar property, in which it would take a $60,000 basis. Example 9 28. a. Carol realizes a gain of $20,000 on contribution of the land. Connie realizes a gain of $60,000 on contribution of the equipment. The partnership realizes a gain equal to the value of the property it receives (it has a $0 basis in the partnership interests it issues). b.Under  § 721, neither the partnership nor either of the partners recognizes any gain on formation of the entity. Example 8 c. Carol will take a substituted basis of $70,000 in her partnership interest ($30 ,000 cash plus $40,000 basis in land). Connie will take a substituted basis of $30,000 in her partnership interest ($30,000 basis in the equipment). Example 14 d. The partnership will take a carryover basis in all the assets it receives ($30,000 basis in cash, $40,000 basis in land, and $30,000 basis in equipment). p. 21-12 e. The partners’ outside bases in their partnership interests total $100,000: Carol’s basis of $70,000 plus Connie’s basis of $30,000.This is the same as the partnership’s basis in assets of $100,000 ($30,000 cash plus $40,000 land plus $30,000 equipment). p. 21-12 f. The partnership will ‘‘step into Connie’s shoes† in determining its depreciation expense. It will use the remaining depreciable life and the same depreciation rates Connie would have used. p. 21-12 29. Both partners are contributing assets valued at $100,000. One property has a built-in gain; the other has a built-in loss. Justin and Tiffany recog nize no gain or loss on contribution of their respective properties to the partnership. Justin takes a substituted basis of $85,000 in his partnership interest ($20,000 cash plus $65,000 basis in land). The partnership takes a $65,000 carryover basis in the contributed land.The â€Å"built-in gain† on the land must be tracked and allocated to Justin if the property is ever sold at a gain [ §Ã‚  704(c)]. Section 721 applies to losses as well as gains and prevents Tiffany from recognizing the $25,000 loss on her contribution to the partnership. She will have a $125,000 basis in a partnership interest worth $100,000. Similarly, the partnership will have a $125,000 basis in assets valued at $100,000. The partnership will â€Å"step into Tiffany’s shoes† in determining depreciation deductions. As this is â€Å"built-in loss† property,  §Ã‚  704(c) applies, and amounts related to the built-in loss must be allocated to Tiffany. Depreciation must be allocated in accordance with Reg.  §Ã‚  1. 704-3 (not discussed in detail in this chapter). Basically, a large portion of the depreciation deductions would be allocated to Tiffany to reduce the difference between her basis and the fair market value of her partnership interest as quickly as possible. (If the property basis was less than its fair market value, depreciation would first be allocated to the other partner. )] pp. 21-10, 21-12, 21-13, 21-24, and Example 9 30. Tiffany has a taxable transaction when she sells the assets to a third party. She receives cash of $100,000 in exchange for assets with a basis of $125,000 and recognizes a $25,000 loss. (Based on the facts presented, the loss will likely be a  §Ã‚  1231 loss. ) When Tiffany contributes the $100,000 cash to the partnership, she recognizes no gain or loss and has a basis of $100,000 in her partnership interest.The partnership, of course, has a basis of $100,000 in the cash it receives. The partnership will need to use Tiffa ny’s $100,000 cash contribution, plus $10,000 of the cash Justin contributed to acquire new equivalent assets for $110,000. In this situation, the tax result to Tiffany is improved (she can recognize her $25,000 realized loss), but there is a $10,000 economic cost to the partnership when it acquires equivalent assets for $110,000 instead of $100,000. pp. 21-10, 21-12, 21-13, 21-24, and Example 8 31. a. None. Under  § 721, neither the partnership nor any of the partners recognize gain on contribution of property to a partnership in exchange for a partnership interest. b. $50,000.Ben’s basis in his partnership interest will equal the basis he held in the property he inherited from his father. The basis a beneficiary takes in property received from an estate generally equals the fair market value of the asset at the date of death or at the alternate valuation date (6 months later) if available and elected. p. 21-26 c. Beth will recognize $25,000 of ordinary income. The fair market value of Beth’s 50% partnership interest is $75,000. Since Beth will contribute only $50,000 of property, the difference between the amount contributed and the value of the interest will be treated as being for services rendered to the partnership. Services do not constitute ‘‘property’’ for purposes of  § 721 nonrecognition treatment. p. 21-11 d.Beth’s basis in her partnership interest will be $75,000 [$50,000 (cash contributed) + $25,000 (the amount of ordinary income recognized for services rendered to the partnership)]. Example 13 32. a. Assets Basis    FMV Cash $ 50,000 $ 50,000 Land50,00075,000 Land improvements 25,000 25,000 Total assets$125,000$150,000 Ben’s capital $ 50,000 $ 75,000 Beth’s capital 75,000 75,000 Total capital$125,000$150,000 Note that the partnership will capitalize the $25,000 deemed payment for Beth’s services, since the services relate to a capitalizable expenditure. The partners hip will reflect this $25,000 in ‘‘cost of lots sold† as the development lots are sold. b.Beth could prepare a development plan and secure zoning permits before the partnership is formed. She could then contribute these plans and permits to the partnership in addition to the $50,000 cash. Since a completed plan would be considered â€Å"property,† no portion of her partnership interest would be received in exchange for services if this were done. The entire transaction would be considered under  § 721. p. 21-12 33. a. Under general guidelines, the $50,000 would be treated as a distribution, which, since it does not exceed Ben’s basis in his interest, would not be taxable. The distribution would reduce Ben’s basis in his partnership interest by $50,000. b. None. c.The partnership would take a basis of $50,000 in the land, Ben’s basis in the property at the time of the contribution. d. The IRS might assert that the contribution and distr ibution transactions were in effect a disguised sale of two-thirds ($50,000 distribution ? $75,000 fair market value) of the property contributed by Ben to the partnership. e. $16,667. Under disguised sale treatment, Ben will recognize gain on a sale of two-thirds of his interest in the land. He will be deemed to have received $50,000 in exchange for two-thirds of the land, with a basis of $33,333 ($50,000 basis ? 2/3). Total gain recognized, then, is $16,667. f. $66,667. The partnership will be deemed to have paid $50,000 for two-thirds of the land.The remaining one-third is deemed to be contributed to the partnership, and the partnership will take a carryover basis of $16,667 in this parcel. The partnership’s total basis is $66,667 ($50,000 + $16,667). Figure 21. 3 and Example 12 34. a. The partners’ initial bases in their partnership interests are the same amounts as their bases in the contributed property ( § 722). Rachel’s basis $360,000 Barry’s ba sis 600,000 b. The 2011 sale results in ordinary income of $170,000 to the partnership. 2011 sale: Selling price$530,000 Basis (360,000) Gain$170,000 The gain is ordinary income, since the land is held as inventory by the partnership. The land was a capital asset to Rachel, but no code provision allows treatment of the gain based on Rachel’s use rather than the partnership’s use. c.The 2012 sale results in a $100,000 capital loss and a $20,000 ordinary ( § 1231) loss. 2012 sale: Selling price$480,000 Basis (600,000) Loss ($120,000) As a sale of inventory (determined at the partnership level), the sale in 2012 of the land contributed by Barry would normally result in an ordinary ( §Ã‚  1231) loss. However,  §Ã‚  724 overrides the usual treatment. The character of the precontribution loss, instead, is determined based on the character of the property in Barry’s hands. This sale was within five years of the capital contribution date, so the loss is capital in nature to the extent of the built-in loss at the contribution date, which is: FMV at contribution$500,000 Basis (600,000) Capital loss ($100,000)The remaining $20,000 loss in 2012 is an ordinary ( § 1231) loss because the character of the post-contribution loss is based on the partnership’s ownership and use of the property as inventory. d. If the property Barry contributed was sold by the partnership in 2017, the entire $120,000 loss would be treated as an ordinary ( §Ã‚  1231) loss. A sale in 2017 would not be within five years of the contribution date, so the character of the loss would be determined solely by reference to the character of the asset to the partnership. Since the land is inventory to the partnership, the loss in 2017 would be ordinary. pp. 21-12, 21-13, and Examples 16 and 17 35. P5 Partnership, Ltd. has incurred costs for organizing ($10,000), starting the business ($60,000), transferring of property ($24,000), and securing investors ($1  million) f or the partnership. The organizational costs are treated under  § 709. Under this section, the first $5,000 of such expenses are deducted (provided the total is less than $50,000); the remainder is amortized over 180 months. The startup costs are treated under  § 195. Under this section, also, the first $5,000 of such expenses are deducted, provided the total is less than $50,000. If costs exceed $50,000, the $5,000 deduction is phased out, dollar for dollar, by the amount of costs in excess of $50,000. When total costs equal or exceed $55,000 (as in this situation), no portion of the expense is currently deductible.Instead, the full amount is amortized over 180 months. The $24,000 transfer tax is treated as a cost of acquiring the land and is added to the partnership’s basis in the land. The $1 million of brokerage commissions is treated as a syndication cost of the partnership. Under  §709, these costs cannot be deducted. pp. 21-15 to 21-17 36. The SB Limited Liabilit y Company must address the following issues in preparing its initial tax return: †¢ What year-end must the LLC use? Unless an election is made under  § 444, the LLC must use the year-end determined under the least aggregate deferral method. There is no majority member, and the principal members do not have the same year-end.Under the least aggregate deferral method, the LLC would use a July year-end since this would result in only a 5-month deferral of income to Block. Example 19 †¢ What method of accounting will the LLC use? Even though both members are Subchapter C corporations, the LLC may elect the cash method of accounting if average annual gross receipts are less than $5 million for the year. The LLC, then, could select either the cash, accrual, or a hybrid method of accounting. p. 21-17 †¢ How are the initial legal fees treated? Can the first $5,000 of organizational expenditures be immediately expensed and the balance amortized over a period of 180 months or more? Would any amounts be treated as startup expenditures under  § 195? p. 21-15 The members’ initial bases in their LLC interests must be determined. The bases will be the substituted basis of the assets contributed to the LLC ($650,000 for Block, and $550,000 for Strauss). Example 14 †¢ The LLC’s basis in the property received from the members must be determined, and any cost recovery related to contributed property calculated. The LLC takes a basis of $650,000 in the equipment and steps into Block’s shoes in determining cost recovery allowances. Since the licenses and drawings are contributed rather than sold, the LLC takes a $0 basis in these assets, with no cost recovery possible. The LLC takes a $50,000 carryover basis in the land and a $500,000 basis in the cash. p. 21-12 The LLC must determine whether any portion of either of the LLC interests is issued in exchange for services. The equipment, cash, and land are considered â€Å"property† for purposes of  § 721. The building permits and architectural designs also are considered property under  § 721, even though they are intangible assets. Therefore, none of the LLC interests is issued in exchange for services. Example 13 †¢ Treatment of expenses incurred during the initial period of operations must be considered. The legal fees are organization costs and their tax treatment was previously noted. The construction costs must be capitalized until such time as the building is placed in service. The office expense may have to be capitalized under either (1)  § 195, if it is etermined that the business is still in the startup stage, or (2)  § 263A if it is determined the costs relate to â€Å"production† of the rental property. If neither of these provisions applies, the office expense is currently deductible. pp. 21-15 and 21-16 †¢ If the land is later sold, a portion of the gain must be allocated to Strauss, since the gain was â€Å"built-inâ €  at the time the property was contributed. Note that if the equipment had been appreciated, depreciation allocations would have to take the precontribution gain into account. Allocation of precontribution deductions related to depreciable property are not covered in this text. p. 21-24 37. In 2008, 2009, and 2010, BR can use either the cash, accrual, or a hybrid method of accounting.BR has at least one Subchapter C corporation as a partner, but BR’s average annual gross receipts did not exceed $5,000,000 in either 2008 or 2009. (BR’s average annual gross receipts were $4,600,000 for 2008 and $4,800,000 for 2009. ) In 2011, BR must change to the accrual method of accounting. BR has at least one Subchapter C corporation as a partner during that year, and BR’s average annual gross receipts for the preceding y

The Twilight Saga 4: Breaking Dawn 24. Surprise

â€Å"No. No way!† I shook my head fiercely and then shot a glance at the smug smile on my seventeen-year-old husband's face. â€Å"No, this doesn't count. I stopped aging three days ago. I am eighteen forever.† â€Å"Whatever,† Alice said, dismissing my protest with a quick shrug. â€Å"We're celebrating anyway, so suck it up.† I sighed. There was rarely a point to arguing with Alice. Her grin got impossibly wider as she read the acquiescence in my eyes. â€Å"Are you ready to open your present?† Alice sang. â€Å"Presents,† Edward corrected, and he pulled another key – this one longer and silver with a less gaudy blue bow – from his pocket. I struggled to keep from rolling my eyes. I knew immediately what this key was to – the â€Å"after car.† I wondered if I should feel excited. It seemed the vampire conversion hadn't given me any sudden interest in sports cars. â€Å"Mine first,† Alice said, and then stuck her tongue out, foreseeing his answer. â€Å"Mine is closer.† â€Å"But look at how she's dressed† Alice's words were almost a moan. â€Å"It's been killing me all day. That is clearly the priority.† My eyebrows pulled together as I wondered how a key could get me into new clothes. Had she gotten me a whole trunkful? â€Å"I know – I'll play you for it,† Alice suggested. â€Å"Rock, paper, scissors.† Jasper chuckled and Edward sighed. â€Å"Why you don't you just tell me who wins?† Edward said wryly. Alice beamed. â€Å"I do. Excellent.† â€Å"It's probably better that I wait for morning, anyway.† Edward smiled crookedly at me and then nodded toward Jacob and Seth, who looked like they were crashed for the night; I wonder how long they'd stayed up this time. â€Å"I think it might be more fun if Jacob was awake for the big reveal, don't you agree? So that someone there is able to express the right level of enthusiasm?† I grinned back. He knew me well. â€Å"Yay,† Alice sang. â€Å"Bella, give Ness – Renesmee to Rosalie.† â€Å"Where does she usually sleep?† Alice shrugged. â€Å"In Rose's arms. Or Jacob's. Or Esme's. You get the picture. She has never been set down in her entire life. She's going to be the most spoiled half-vampire in existence.† Edward laughed while Rosalie took Renesmee expertly in her arms. â€Å"She is also the most unspoiled half-vampire in existence,† Rosalie said. â€Å"The beauty of being one of a kind.† Rosalie grinned at me, and I was glad to see that the new comradeship between us was still there in her smile. I hadn't been entirely sure it would last after Renesmee's life was no longer tied to mine. But maybe we had fought together on the same side long enough that we would always be friends now. I'd finally made the same choice she would have if she'd been in my shoes. That seemed to have washed away her resentment for all my other choices. Alice shoved the beribboned key in my hand, then grabbed my elbow and steered me toward the back door. â€Å"Let's go, let's go,† she trilled. â€Å"Is it outside?† â€Å"Sort of,† Alice said, pushing me forward. â€Å"Enjoy your gift,† Rosalie said. â€Å"It's from all of us. Esme especially.† â€Å"Aren't you coming, too?† I realized that no one had moved. â€Å"We'll give you a chance to appreciate it alone,† Rosalie said. â€Å"You can tell us about it†¦ later.† Emmett guffawed. Something about his laugh made me feel like blushing, though I wasn't sure why. I realized that lots of things about me – like truly hating surprises, and not liking gifts in general much more – had not changed one bit. It was a relief and revelation to discover how much of my essential core traits had come with me into this new body. I hadn't expected to be myself. I smiled widely. Alice tugged my elbow, and I couldn't stop smiling as I followed her into the purple night. Only Edward came with us. â€Å"There's the enthusiasm I'm looking for,† Alice murmured approvingly. Then she dropped my arm, made two lithe bounds, and leaped over the river. â€Å"C'mon, Bella,† she called from the other side. Edward jumped at the same time I did; it was every bit as fun as it had been this afternoon. Maybe a little bit more fun because the night changed everything into new, rich colors. Alice took off with us on her heels, heading due north. It was easier to follow the sound of her feet whispering against the ground and the fresh path of her scent than it was to keep my eyes on her through the thick vegetation. At no sign I could see, she whirled and dashed back to where I paused. â€Å"Don't attack me,† she warned, and sprang at me. â€Å"What are you doing?† I demanded, squirming as she scrambled onto my back and wrapped her hands around my face. I felt the urge to throw her off, but I controlled it. â€Å"Making sure you can't see.† â€Å"I could take care of that without the theatrics,† Edward offered. â€Å"You might let her cheat. Take her hand and lead her forward.† â€Å"Alice, I – â€Å" â€Å"Don't bother, Bella. We're doing this my way.† I felt Edward's fingers weave through mine. â€Å"Just a few seconds more, Bella. Then she'll go annoy someone else.† He pulled me forward. I kept up easily. I wasn't afraid of hitting a tree; the tree would be the only one getting hurt in that scenario. â€Å"You might be a little more appreciative,† Alice chided him. â€Å"This is as much for you as it is for her.† â€Å"True. Thank you again, Alice.† â€Å"Yeah, yeah. Okay.† Alice's voice suddenly shot up with excitement. â€Å"Stop there. Turn her just a little to the right. Yes, like that. Okay. Are you ready?† she squeaked. â€Å"I'm ready.† There were new scents here, piquing my interest, increasing my curiosity. Scents that didn't belong in the deep woods. Honeysuckle. Smoke. Roses. Sawdust? Something metallic, too. The richness of deep earth, dug up and exposed. I leaned toward the mystery. Alice hopped down from my back, releasing her grip on my eyes. I stared into the violet dark. There, nestled into a small clearing in the forest, was a tiny stone cottage, lavender gray in the light of the stars. It belonged here so absolutely that it seemed as if it must have grown from the rock, a natural formation. Honeysuckle climbed up one wall like a lattice, winding all the way up and over the thick wooden shingles. Late summer roses bloomed in a handkerchief-sized garden under the dark, deep-set windows. There was a little path of flat stones, amethyst in the night, that led up to the quaint arched wooden door. I curled my hand around the key I held, shocked. â€Å"What do you think?† Alice's voice was soft now; it fit with the perfect quiet of the storybook scene. I opened my mouth but said nothing. â€Å"Esme thought we might like a place of our own for a while, but she didn't want us too far away,† Edward murmured. â€Å"And she loves any excuse to renovate. This little place has been crumbling away out here for at least a hundred years.† I continued staring, mouth gaping like a fish. â€Å"Don't you like it?† Alice's face fell. â€Å"I mean, I'm sure we could fix it up differently, if you want. Emmett was all for adding a few thousand square feet, a second story, columns, and a tower, but Esme thought you would like it best the way it was meant to look.† Her voice started to climb, to go faster. â€Å"If she was wrong, we can get back to work. It won't take long to – â€Å" â€Å"Shh!† I managed. She pressed her lips together and waited. It took me a few seconds to recover. â€Å"You're giving me a house for my birthday?† I whispered. â€Å"Us,† Edward corrected. â€Å"And it's no more than a cottage. I think the word house implies more legroom.† â€Å"No knocking my house,† I whispered to him. Alice beamed. â€Å"You like it.† I shook my head. â€Å"Love it?† I nodded. â€Å"I can't wait totell Esme!† â€Å"Why didn't she come?† Alice's smile faded a little, twisted just off what it hadbeen, like my question was hard to answer. â€Å"Oh, you know†¦ they all remember how you are about presents. They didn't want to put you under too much pressure to like it.† â€Å"But of course I love it. How could I not?† â€Å"They'll like that.† She patted my arm. â€Å"Anyhoo, your closet is stocked.Use it wisely. And†¦ I guess that's everything.† â€Å"Aren't you going to come inside?† She strolled casually a few feet back. â€Å"Edward knows his way around. I'll stop by†¦ later. Call me if you can't match your clothes right.† She threw me a doubtful look and then smiled. â€Å"Jazz wants to hunt. See you.† She shot off into the trees like the most graceful bullet. â€Å"That was weird,† I said when the sound of her flight had vanished completely. â€Å"Am I really that bad? They didn't have to stay away. Now I feel guilty. I didn't even thank her right. We should go back,tell Esme – â€Å" â€Å"Bella,don't besilly. No one thinks you're that unreasonable.† â€Å"Then what – â€Å" â€Å"Alone time is their other gift. Alice was trying to be subtle about it.† â€Å"Oh.† That was all it took to make the house disappear. We could have been anywhere. I didn't see the trees or the stones or the stars. It was just Edward. â€Å"Let me show you what they've done,† he said, pulling my hand. Was he oblivious to the fact that an electric current was pulsing through my body like adrenaline-spiked blood? Once again I felt oddly off balance, waiting for reactions my body wasn't capable of anymore. My heart should have been thundering like a steam engine about to hit us. Deafening. My cheeks should have been brilliant red. For that matter, I ought to have been exhausted. This had been the longest day of my life. I laughed out loud – just one quiet little laugh of shock – when I realized that this day would never end. â€Å"Do I get to hear the joke?† â€Å"It's not a very good one,† I told him as he led the way to the little rounded door. â€Å"I was just thinking – today is the first and last day of forever. It's kind of hard to wrap my head around it. Even with all this extra room for wrapping.† I laughed again. He chuckled with me. He held his hand out toward the doorknob, waiting for me to do the honors. I stuck the key in the lock and turned it. â€Å"You're such a natural at this, Bella; I forget how very strange this all must be for you. I wish I could hear it.† He ducked down and yanked me up into his arms so fast that I didn't see it coming – and that was really something. â€Å"Hey!† â€Å"Thresholds are part of my job description,† he reminded me. â€Å"But I'm curious. Tell me what you're thinking about right now.† He opened the door – it fell back with a barely audible creak – and stepped through into the little stone living room. â€Å"Everything,† I told him. â€Å"All at the same time, you know. Good things and things to worry about and things that are new. How I keep using too many superlatives in my head. Right now, I'm thinking that Esme is an artist. It's so perfect!† The cottage room was something from a fairy tale. The floor was a crazy quilt of smooth, flat stones. The low ceiling had long exposed beams that someone as tall as Jacob would surely knock his head on. The walls were warm wood in some places, stone mosaics in others. The beehive fireplace in the corner held the remains of a slow flickering fire. It was driftwood burning there – the low flames were blue and green from the salt. It was furnished in eclectic pieces, not one of them matching another, but harmonious just the same. One chair seemed vaguely medieval, while a low ottoman by the fire was more contemporary and the stocked bookshelf against the far window reminded me of movies set in Italy. Somehow each piece fit together with the others like a big three-dimensional puzzle. There were a few paintings on the walls that I recognized – some of my very favorites from the big house. Priceless originals, no doubt, but they seemed to belong here, too, like all the rest. It was a place where anyone could believe magic existed. A place where you just expected Snow White to walk right in with her apple in hand, or a unicorn to stop and nibble at the rosebushes. Edward had always thought that he belonged to the world of horror stories. Of course, I'd known he was dead wrong. It was obvious that he belonged here. In a fairy tale. And now I was in the story with him. I was about to take advantage of the fact that he hadn't gotten around to setting me back on my feet and that his wits-scramblingly beautiful face was only inches away when he said, â€Å"We're lucky Esme thought to add an extra room. No one was planning for Ness – Renesmee.† I frowned at him, my thoughts channeled down a less pleasant path. â€Å"Not you, too,† I complained. â€Å"Sorry, love. I hear it in their thoughts all the time, you know. It's rubbing off on me.† I sighed. My baby, the sea serpent. Maybe there was no help for it. Well, /wasn't giving in. Tm sure you're dying to see the closet. Or, at least I'll tell Alice that you were, to make her feel good.† â€Å"Should I be afraid?† â€Å"Terrified.† He carried me down a narrow stone hallway with tiny arches in the ceiling, like it was our own miniature castle. â€Å"That will be Renesmee's room,† he said, nodding to an empty room with a pale wooden floor. â€Å"They didn't have time to do much with it, what with the angry werewolves___† I laughed quietly, amazed at how quickly everything had turned right when it had all had looked so nightmarish just a week ago. Drat Jacob for making everything perfect this way. â€Å"Here's our room. Esme tried to bring some of her island back here for us. She guessed that we would get attached.† The bed was huge and white, with clouds of gossamer floating down from the canopy to the floor. The pale wood floor matched the other room, and now I grasped that it was precisely the color of a pristine beach. The walls were that almost-white-blue of a brilliant sunny day, and the back wall had big glass doors that opened into a little hidden garden. Climbing roses and a small round pond, smooth as a mirror and edged with shiny stones. A tiny, calm ocean for us. â€Å"Oh† was all I could say. â€Å"I know,† he whispered. We stood there for a minute, remembering. Though the memories were human and clouded, they took over my mind completely. He smiled a wide, gleaming smile and then laughed. â€Å"The closet is through those double doors. I should warn you – it's bigger than this room.† I didn't even glance at the doors. There was nothing else in the world but him again – his arms curled under me, his sweet breath on my face, his lips just inches from mine – and there was nothing that could distract me now, newborn vampire or not. â€Å"We're going to tell Alice that I ran right to the clothes,† I whispered, twisting my fingers into his hair and pulling my face closer to his. â€Å"We're going to tell her I spent hours in there playing dress-up. We're going to lie† He caught up to my mood in an instant, or maybe he'd already been there, and he was just trying to let me fully appreciate my birthday present, like a gentleman. He pulled my face to his with a sudden fierceness, a low moan in his throat. The sound sent the electric current running through my body into a near-frenzy, like I couldn't get close enough to him fast enough. I heard the fabric tearing under our hands, and I was glad my clothes, at least, were already destroyed. It was too late for his. It felt almost rude to ignore the pretty white bed, but we just weren't going to make it that far. This second honeymoon wasn't like our first. Our time on the island had been the epitome of my human life. The very best of it. I'd been so ready to string along my human time, just to hold on to what I had with him for a little while longer. Because the physical part wasn't going to be the same ever again. I should have guessed, after a day like today, that it would be better. I could really appreciate him now – could properly see every beautiful line of his perfect face, of his long, flawless body with my strong new eyes, every angle and every plane of him. I could taste his pure, vivid scent on my tongue and feel the unbelievable silkiness of his marble skin under my sensitive fingertips. My skin was so sensitive under his hands, too. He was all new, a different person as our bodies tangled gracefully into one on the sand-pale floor. No caution, no restraint. No fear – especially not that. We could love together – both active participants now. Finally equals. Like our kisses before, every touch was more than I was used to. So much of himself he'd been holding back. Necessary at the time, but I couldn't believe how much I'd been missing. I tried to keep in mind that I was stronger than he was, but it was hard to focus on anything with sensations so intense, pulling my attention to a million different places in my body every second; if I hurt him, he didn't complain. A very, very small part of my head considered the interesting conundrum presented in this situation. I was never going to get tired, and neither was he. We didn't have to catch our breath or rest or eat or even use the bathroom; we had no more mundane human needs. He had the most beautiful, perfect body in the world and I had him all to myself, and it didn't feel like I was ever going to find a point where I would think, Now I've had enough for one day. I was always going to want more. And the day was never going to end. So, in such a situation, how did we ever stop? It didn't bother me at all that I had no answer. I sort of noticed when the sky began to lighten. The tiny ocean outside turned from black to gray, and a lark started to sing somewhere very close by – maybe she had a nest in the roses. â€Å"Do you miss it?† I asked him when her song was done. It wasn't the first time we'd spoken, but we weren't exactly keeping up a conversation, either. â€Å"Miss what?† he murmured. â€Å"All of it – the warmth, the soft skin, the tasty smell†¦ I'm not losing anything at all, and I just wondered if it was a little bit sad for you that you were.† He laughed, low and gentle. â€Å"It would be hard to find someone less sad than I am now. Impossible, I'd venture. Not many people get every single thing they want, plus all the things they didn't think to ask for, in the same day.† â€Å"Are you avoiding the question?† He pressed his hand against my face. â€Å"You are warm,† he told me. It was true, in a sense. To me, his hand was warm. It wasn't the same as touching Jacob's flame-hot skin, but it was more comfortable. More natural. Then he pulled his fingers very slowly down my face, lightly tracing from my jaw to my throat and then all the way down to my waist. My eyes rolled back into my head a little. â€Å"You are soft.† His fingers were like satin against my skin, so I could see what he meant. â€Å"And as for the scent, well, I couldn't say I missed that. Do you remember the scent of those hikers on our hunt?† â€Å"I've been trying very hard not to.† â€Å"Imagine kissing that.† My throat ripped into flames like pulling the cord on a hot-air balloon. â€Å"0/7.† â€Å"Precisely. So the answer is no. I am purely full of joy, because I am missing nothing. No one has more than I do now.† I was about to inform him of the one exception to his statement, but my lips were suddenly very busy. When the little pool turned pearl-colored with the sunrise, I thought of another question for him. â€Å"How long does this go on? I mean, Carlisle and Esme, Em and Rose, Alice and Jasper – they don't spend all day locked in their rooms. They're out in public, fully clothed, all the time. Does this†¦ craving ever let up?† I twisted myself closer into him – quite an accomplishment, actually – to make it clear what I was talking about. â€Å"That's difficult to say. Everyone is different and, well, so far you're the very most different of all. The average young vampire is too obsessed with thirst to notice much else for a while. That doesn't seem to apply to you. With the average vampire, though, after that first year, other needs make themselves known. Neither thirst nor any other desire really ever fades. It's simply a matter of learning to balance them, learning to prioritize and manage___† â€Å"How long?† He smiled, wrinkling his nose a little. â€Å"Rosalie and Emmett were the worst. It took a solid decade before I could stand to be within a five-mile radius of them. Even Carlisle and Esme had a difficult time stomaching it. They kicked the happy couple out eventually. Esme built them a house, too. It was grander than this one, but then, Esme knows what Rose likes, and she knows what you like.† â€Å"So, after ten years, then?† I was pretty sure that Rosalie and Emmett had nothing on us, but it might sound cocky if I went higher than a decade. â€Å"Everybody is normal again? Like they are now?† Edward smiled again. â€Å"Well, I'm not sure what you mean by normal. You've seen my family going about life in a fairly human way, but you've been sleeping nights.† He winked at me. â€Å"There's a tremendous amount of time left over when you don't have to sleep. It makes balancing your†¦ interests quite easy. There's a reason why I'm the best musician in the family, why – besides Carlisle – I've read the most books, studied the most sciences, become fluent in the most languages†¦. Emmett would have you believe that I'm such a know-it-all because of the mind reading, but the truth is that I've just had a lot of free time.† We laughed together, and the motion of our laughter did interesting things to the way our bodies were connected, effectively ending that conversation.