I need help ASAP. Note: this homework is GRADED Guy, Alma, and Kara form the Ivo
ID: 2594038 • Letter: I
Question
I need help ASAP. Note: this homework is GRADED
Guy, Alma, and Kara form the Ivory Partnership. In exchange for a 30% capital interest, Guy transfers property (basis of $200,000, far market value of $400,000) subject to a liability of $100,000. The liability is assumed by the partnership. Alma transfers property (basis of $350,000; fair market value of $300,000) for a 30% capital interest. Kara invests cash of $400,000 for the remaining 40% capital interest. Concerning these transactions, provide the following information: If an amount is zero, enter "o" a. Guy's recognized gain is b. Guy's basis in the partnership interest is c. Alma's recognized loss is d. Alma's basis in the partnership interest is e. Kara's basis in the partnership interest is f. Ivory Partnership's basis in the property transferred by Guy is and from Alma isExplanation / Answer
a. When a pertner contributes property for interest in partnership, then adjusted basis in property becomes his basis in interest in partnership and no gain is recognized on this transaction. However if any liability is also assumed by the company then, the amount of such debt assumed is treated as cash paid to the partner and therefore, gain is required to be recognized for the part of the interest of other partners. In the given case, Guy recognized gain will be $100,000 x (100% - 30%) = 70,000.
b. Guy basis in partnership is:
Adjusted Basis in property = $200,000
Less: 70% of liability = $70,000
Net Interest basis of Guy = $130,000
c. Similarly no loss is recognized by the partner if his adjusted basis is less than fair market value at the time of transfer. Recognized loss will be $0
d. Alma's basis in partnership is the basis in property transferred i.e $350,000
e. Kara's basis in partnership is the cash he/she paid for 40% partnership i.e. $400,000
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