A finished ACC-661 Topic 5 excess distribution DQ post example, counting a cash draw and a liability decrease against year-end basis and showing two ways the resulting gain could have been avoided. Searches like "acc 661 topic 5 assignment example", "acc661 topic 5 sample" and "acc-661 topic 5 example" land here.
What a finished ACC-661 Topic 5 excess distribution DQ post looks like
The post argues from its opening line that gain from a distribution in excess of basis is usually a planning failure visible months earlier. Figures are illustrative. The partner starts the year with $35,000 of outside basis and is allocated $40,000 of income. Mid-year she draws $60,000, and later the partnership pays down a loan, cutting her share of its liabilities by $30,000, which section 752(b) treats as a further cash distribution. Because draws against the year's share are treated as made at year end, her income raises basis to $75,000 before the $90,000 of distributions is measured. The excess, $15,000, is gain under section 731(a), leaving her with no basis. The post then shows that a $45,000 draw, or a paydown deferred to January, would have avoided it, and asks classmates which fix they would choose.
How an ACC-661 Topic 5 example is structured
Claim, basis roll and fixes run through the post in that order. The first sentence states the claim, so classmates know what the figures are meant to prove. Her year follows as a short basis roll: opening basis, income allocated, then the two distributions. A third passage explains why the draw is tested at year end rather than on the day it was taken, and what the answer would look like if it were not. The fourth passage treats the debt paydown as the less visible of the two distributions and the one partners tend to miss. The post then works the two fixes in a sentence each, a smaller draw and a deferred paydown, and states what each costs. Sections 731 and 752 are cited inline where each is used, and the post closes with a question to classmates about which fix the partnership should prefer.
Avoidability claimed at the outset
The post opens by arguing the $15,000 gain could have been foreseen and avoided, which hands classmates a claim they can dispute.
Income added before distributions are tested
Treating the draw as made at year end lets the $40,000 income share raise basis first, so only the excess over $75,000 becomes gain.
Debt relief counted as cash
The $30,000 fall in her liability share is a distribution under section 752(b), and it is the part of the $90,000 most partners never see coming.
Gain measured, basis zeroed
Section 731(a) recognizes the $15,000 by which money distributed exceeds basis, generally as gain from the sale of a partnership interest, and her basis ends the year at zero.
Two fixes, each priced
Holding the draw to $45,000 costs her $15,000 of cash this year, while deferring the paydown costs the partnership a month of interest on the debt.
A question about who bears the cost
Classmates are asked whether the partner or the partnership should bear the cost of avoiding the gain, which invites replies that argue from the agreement.
Where marks go in ACC-661 Topic 5
Stating that excess distributions produce gain, and never computing one, is the thinnest answer this prompt gets. A post that measures the $60,000 draw against the $35,000 opening basis overstates the gain, because it ignores the year-end timing of draws and the income allocated before them. The more common error runs the other way: leaving the $30,000 debt reduction out entirely and concluding that no gain arises, since $60,000 is below $75,000. Calling the gain capital without noting that section 751 hot assets could make part of it ordinary claims more than the facts establish. Posts that compute the gain correctly and stop never reach the planning claim the prompt invites. Replies that agree add little, while one that runs a classmate's fix against the partnership agreement moves the thread forward.
Get an ACC-661 Topic 5 example written to your instructions
Send the ACC-661 Topic 5 discussion question, the number of replies your section requires and any partner figures from the case. A custom example is written to them in 24 to 48 hours, with a position stated first, basis rolled through the year, every distribution counted including debt relief, the gain measured and a planning alternative priced. The first one is free.
ACC-661 Topic 5 questions, answered
Why are draws treated as made at year end?
The regulations treat advances or drawings of money against a partner's distributive share of income as current distributions made on the last day of the partnership's taxable year. That lets the year's income increase basis before the draw is measured against it, which matches the draw to the income it anticipates. A distribution that is not a draw against the year's share is tested when it is made.
Is the gain capital or ordinary?
Section 731(a) treats it as gain from the sale or exchange of the partnership interest, which is generally capital. If the partnership holds unrealized receivables or substantially appreciated inventory, section 751 can change the character of part of the result. The post assumes a partnership without such assets and says so, since the character question can matter as much as the amount.
Can marketable securities trigger the same gain?
Yes. Under section 731(c), marketable securities distributed by a partnership are generally treated as money for this purpose, measured at fair market value, subject to exceptions and reductions the provision sets out. A partner receiving securities instead of cash can therefore face the same excess-over-basis gain. The post mentions this in a single sentence, because the prompt asks about cash.