I:17-49 Transactions Between the Partners and the Partnership. Kevin has a 30% interest in the KLM Partnership. Louis (Kevin’s son) also has a 30% interest. An individual unrelated to either Kevin or Louis holds the remaining 40% interest. Kevin sells the following assets to the partnership during the year:

• Common stock (a capital asset held more than one year) having a $10,000 basis and a

$25,000 FMV and selling price.

• Land (a Sec. 1231 asset) having a $100,000 adjusted basis and a $60,000 FMV and selling price.

• Machine having a $50,000 adjusted basis and a $70,000 FMV and selling price. The original cost of the machine was $60,000, and Kevin deducted $10,000 in MACRS depreciation before the transfer.

a. What are the amount and character of Kevin’s recognized gain or loss on the sale of the common stock? The land? The machine?

b. What gain or loss would the partnership recognize if it sells the land two years later for $90,000?