Mother nature and spirit world form the earth partnership. Mother nature contrib

Question

Mother nature and spirit world form the earth partnership. Mother nature contributes assets with a fair market value of $1,750,000 and an adjusted basis of $400,00 for 60 percent interest int he partnership. the assets are subject to a liability of $1,200,000. spirit world contributes cash of $20,000 for her 40 percent interest in the partnership.

A.) how much gain is recognized by mother nature?

B.) how much liability is allocable to spirit world?

C.) How much gain is recognized by spirit world for the conributed cash?

Explanation / Answer

Answer:

Given that

Assets = 1750000

Liability = 1200000

Net = Assets- Liability

= 1750000-1200000

= 550000

Adjusted value

= 400000

So here we have the loss for mother nature which i equals to = net -adjusted value

=550000-400000

=150000

100% value of partnership earth is given as follows

i.e., = 400000*(100/60)

= 400000*1.6666666

= 666666.6667

= 666667

Now contribution by the mother nature = 666667-400000

= 266667

cash given by the spirit world = 20000

Finally the gain recognised by the spirit world is = 266667 - 20000

= 146667

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