Question
David and Goliath form the DG Partnership. Each received a one-half interest in capital and profits. David contributed land having a fair market value of
David and Goliath form the DG Partnership. Each received a one-half interest in capital and profits. David contributed land having a fair market value of $10,000. The adjusted basis of the land in the hands of David was $8,000. Goliath contributed legal and tax planning services. Immediately following the formation, the FMV of a one-half interest in the DG partnership was $10,000.
a. How much income gain will Goliath recognize as a result of his contribution?
b. How much income or gain will David recognize as a result of his contribution?
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Financial Accounting Tools For Business Decision Making
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine, Christopher D. Burnley
8th Canadian Edition
111959457X, 978-1119594574
