1. On January 1 of the current taxable year, Sam and Barbara formed an equal partnership. Sam made a cash contribution of $60,000 and a contribution of property with an adjusted basis to him of $160,000 and a fair market value of $140,000 in exchange for his interest in the partnership. Barbara contributed property with an adjusted basis to her of $120,000 and a fair market value of $200,000 in exchange for her partnership interest. Which of the following statements is accurate regarding the income tax consequences of this transaction?

a. Sam’s adjusted basis in his partnership interest is $200,000.

b. The partnership’s adjusted basis in the assets contributed by Sam is $140,000.

c. Barbara recognized a gain of $80,000 with respect to her contribution of property.

d. Barbara’s adjusted basis in her partnership interest is $120,000.

2. Tina and Betty formed a partnership. Tina received a 40 percent interest in the partnership in exchange for land with an adjusted basis to her of $60,000 and a fair market value of $80,000. Betty received a 60 percent interest in the partnership in exchange for $120,000 of cash. Three years after the date of contribution, the land contributed by Tina was sold by the partnership to an unrelated third party for $90,000. How much gain was required to be allocated to Tina as a result of the sale by the partnership?

a. $4,000

b. $12,000

c. $24,000

d. $30,000

3. When inventory that was contributed to a partnership in exchange for a partnership interest is eventually sold by the partnership, how will the character of the income or loss be determined?

a. The character of any income or loss will be ordinary regardless of when the contributed property is sold by the partnership and regardless of the character of the asset in the hands of the partnership.

b. The character of any income or loss will be ordinary if the contributed property is sold by the partnership within five years after the date of contribution regardless of the character of the asset in the hands of the partnership.

c. The character of any income or loss will be based on the character of the asset in the hands of the partnership regardless of when the contributed property is sold by the partnership.

d. The character of any income or loss will be ordinary to the extent of the contributing partner’s built-in gain or loss in the property at the time of the contribution regardless of when the contributed property is sold, and any balance will based on the character of the asset in the hands of the partnership.