Mr. D and Mr. E formed a calendar-year partnership. Mr. D contributed land that

Question

Mr. D and Mr. E formed a calendar-year partnership. Mr. D contributed land that had a basis to him of $5,000 and a fair market value of $10,000. The land was contributed subject to a mortgage of $3,000. Mr. E is to manage the partnership's business for which he will receive a one-half interest in the profits, losses, and capital of the partnership. Neither of the partners nor the partnership is required to recognize gain(income) or loss on the formation of the partnership.

True.

False.

True.

False.

Explanation / Answer

The given statement is true as no gain or loss is recognised on the formation of the partnership. The contribution of property will affect the basis of the partner in the partnership firm.

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