Example 3 Secs. 724 and 704(c) -- The SJ PARTNERSHIP was formed to acquire land and...

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Example 3 Secs. 724 and 704(c) -- The SJ PARTNERSHIP was formed to acquire land and subdivide it as residential housing lots. On July 1, 2020, Sarah contributed land valued at $200,000 to the partnership in exchange for a 50% interest. She had purchased the land in 2012 for $160,000 and held it for investment purposes. The partnership holds the land as inventory. On that same date, Joe contributed land valued at $200,000 that he had purchased in 2015 for $240,000. He also became a 50% owner. Joe is a real estate developer, but he held this land personally for investment purposes. The partnership holds this land as inventory. In 2021, the partnership sells the land contributed by Sarah for $220,000. In 2022, the partnership sells half of the subdivided real estate contributed by Joe for $88,000. The other half is finally sold in 2028 for $110,000. What are the tax consequences of the formation and the subsequent sales of the property? How would your answer change if the partnership agreement contained the following statement? "All gains and losses shall be allocated equally between the partners unless otherwise required under the law." Example 3 Secs. 724 and 704(c) -- The SJ PARTNERSHIP was formed to acquire land and subdivide it as residential housing lots. On July 1, 2020, Sarah contributed land valued at $200,000 to the partnership in exchange for a 50% interest. She had purchased the land in 2012 for $160,000 and held it for investment purposes. The partnership holds the land as inventory. On that same date, Joe contributed land valued at $200,000 that he had purchased in 2015 for $240,000. He also became a 50% owner. Joe is a real estate developer, but he held this land personally for investment purposes. The partnership holds this land as inventory. In 2021, the partnership sells the land contributed by Sarah for $220,000. In 2022, the partnership sells half of the subdivided real estate contributed by Joe for $88,000. The other half is finally sold in 2028 for $110,000. What are the tax consequences of the formation and the subsequent sales of the property? How would your answer change if the partnership agreement contained the following statement? "All gains and losses shall be allocated equally between the partners unless otherwise required under the law."