Joe, Kate, and Lisa form an equal 1/3 each partnership. Joe contributes land FMV

Question

Joe, Kate, and Lisa form an equal 1/3 each partnership.

Joe contributes land FMV of $20,000 (basis $15,000) and land was a Section 1231 asset previously.

Kate contributes inventory FMV $10,000 (basis $7,500) and cash of $10,000.

Lisa contributes equipment that she has depreciated over the past two years in an unrelated business. She bought the equipment for $24,000 and has taken $12,000 in depreciation. The FMV of it is $20,000 at the time of her contribution.

Will any gain or loss be recognized on the formation? What will each partner’s outside basis and holding period be in their partnership interests immediately following the formation of the partnership?

Explanation / Answer

No gain or loss is recognized for the formation of the partnership.

Partners outside basis:

for Section 1231 and 1221 property, partner tacks on the holding period of the asset to his partnership interest holding period. Thus they will be regarded as on hold from the previous years when purchased

Related Questions

Navigate

• Browse (All)
• Browse J
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.