18. Barbara and Bill formed an equal partnership, B&B, a general partnership, on

Question

18.        Barbara and Bill formed an equal partnership, B&B, a general partnership, on January 1, 2017. Barbara contributed $100,000 in exchange for her one-half interest. Bill contributed land worth $100,000 that had an adjusted basis to him of $30,000 in exchange for his one-half interest. Which of the following statements is accurate with respect to this transaction?

a. None of Barbara, Bill, or B&B recognized any gain or loss.

b. Bill recognized gain of $70,000 , but Barbara and B&B did not recognize any gain or loss.

c.   B&B recognized gain of $70,000 , but Barbara and Bill did not recognize any gain or loss.

d.   Bill and B&B each recognized $70,000 of gain, but Barbara did not recognize any gain or loss.

Explanation / Answer

The answer is option “a” - None of Barbara, Bill, or B&B recognized any gain or loss.

This is because when a partner contributes a property to a partnership entity (in exchange for partnership interest) then there is no gain or loss on such contributions. The basis that a partner has in a property will become the basis that the partnership entity will get in that property.

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