Mr. Black and Mr. Red operate accounting practices as sole practitioners. They wish to form a partnership in which Mr. Black will hold a 60% share and Mr. Red a 40% share. The relevant financial data for the separate practices as at December 31 of this year are as follows;

The tax values of the following assets are:

REQUIRED
(1) Compute the values at which the assets should be transferred to defer any immediate tax consequences of the transfer assuming the accounts payable are not transferred to the partnership and no consideration other than a partnership interest is received.
(2) Compute the adjusted cost bases of the partnership interests of Mr. Black and Mr. Red.
(3) Indicate the tax effects of having the partnership assume the accounts payable of Mr. Black and Mr. Red.
(4) Indicate the tax consequences to Mr. Black and Mr. Red of having the partnership dispose of the land next year for proceeds of disposition of $50,000. Assume that the land is capital property to the partnership, and that no consideration, other than a partnership interest, is received by the partners.

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Cash Marketable securities Land (capital property) Accounts receivable Furniture and fixtures Leasehold improvements Goodwill Accounts payable Mr. Black FMV $94,000 10,000 Cost $94,000 20,000 5,000 50,000 130,000 130,000 80,000 80,000 30,000 40,000 20,000 50,000 $379,000 $454,000 $160,000 $120,000 Mr. Red Cost $60,000 10,000 40,000 30,000 20,000 FMV $60,000 5,000 - 40,000 34,000 $139,000 $130,000