ACCT 540

Partnership Formations Problem (This problem uses the same facts as assignment 4 except the transfer is to a partnership)

Mary and Todd form the MT Partnership, with a transfer of the following properties:

Mary $200,000 cash

Todd $200,000 FMV property

$35,000 tax basis

Mary will receive 50% and Todd 50% of the interests in capital, profits, and losses.

Complete the following

Mary Todd

Realized gain ________------------

Recognized gain________ ------------

Basis of Interests_________ ------------

MT basis in contributed asset ________ ---------------

VARIATION 1: Return to original facts (same basis). Todds property is valued at $220,000 but is contributed subject to a $20,000 liability.(This means that Todd still contributes equity of $200,000 so it is still a 50/50 split of ownership. Under partnership debt sharing rules each members share of the debt will be 50%, or $10,000.

Complete the following

Mary Todd

Realized gain ________------------

Recognized gain________ ------------

Basis of Interests_________ ------------

MT basis in contributed asset ________ ---------------

VARIATION 2: Same as Variation 1 (same basis) except Todds property is valued at $260,000 and is contributed subject to a liability of $60,000. (Again, Todd contributes $200,000 of equity). Under partnership debt sharing rules each members share of the debt is 50% ($30,000 each)>

Complete the following

Mary Todd

Realized gain ________------------

Recognized gain________ ------------

Basis of Interests_________ ------------

MT basis in contributed asset ________ ---------------