Facts A (Partnership):

Joe and Sunny intend to enter into a business venture together and decided that a partnership would be a desirable entity choice for federal income tax purposes. The partnership is named Michigan Partnership (MIP). For newly established MIP, Joe intends to contribute Property A with fair market value (FMV) of $800 and basis of $300. Sunny intends to contribute cash of $800. For purposes of this question, Joe and Sunny are equal partners with no special tax allocations.

Provide Joes basis in MIP upon contribution (i.e., Year 0) of Property A. $300

Provide Sunnys basis in MIP upon contribution (i.e., Year 0) of cash. $800

Provide MIPs basis in Property A and cash immediately after contribution. Property A $300

Cash $800

At the end of Year 1, MIP had an operating loss of $500. What would be Joes and Sunnys outside basis at the end of Year 1. Note that the loss is all active. Total loss is $500 split in half is $250. Then subtract from original Joes would be $50 and Sunnys would be $550

Assume that at the end of Year 1, MIP had an operating loss of $100 instead of $500. Also, MIP made cash distribution of $800 at the end of Year 1. Provide Joes and Sunnys outside basis at the end of Year 1 and also provide any additional tax consequence(s) for Joe and Sunny if any.

Assume that at the end of Year 1, MIP had an operating loss of $100. Also, MIP made distribution of Property A only to Joe at the end of Year 1. For purposes of this question, assume no depreciation was taken for Property A for Year 1 and FMV remained the same from the date of contribution. Provide Joes and Sunnys outside basis at the end of Year 1 and Joes basis in Property A upon distribution to him.

Assume that at the end of Year 2, Joes and Sunnys basis in MIP are $500 and $700, respectively. For purposes of this question, Property A was not distributed to Joe as noted above. Rather, Property A was disposed at the end of Year 2. At the time of disposition, FMV and basis of Property A were $900 and $100, respectively. What would be Joes and Sunnys outside basis at the end of Year 2.

Facts B (Partnership):

Assume that the facts are the same as noted in Facts A except for the following: Joe intends to contribute Property A with fair market value (FMV) of $800 and basis of $300. At that time of contribution, Property A was encumbered with $300 debt financed from Bank A. Sunny intends to contribute cash of $800. For purposes of this question, Joe and Sunny are equal partners with no special tax allocations.

Provide Joes basis in MIP upon contribution (i.e., Year 0) of Property A.

Provide Sunnys basis in MIP upon contribution (i.e., Year 0) of cash.

Provide MIPs basis in Property A and cash immediately after contribution.

At the end of Year 1, MIP had an operating income of $1,000. MIP made cash distribution of $1,000 and distributed Property A only to Joe. For purposes of this question, assume no depreciation was taken for Property A for Year 1 and FMV remained the same from the date of contribution. Provide Joes and Sunnys outside basis at the end of Year 1 and Joes basis in Property A upon distribution to him.

Facts C (S Corporation):

Joe and Sunny intend to enter into a business venture together and decided that an S corporation would be a desirable entity choice for federal income tax purposes. The corporation is named Michigan Inc. (MII). For newly established MII, Joe intends to contribute Property A with fair market value (FMV) of $800 and basis of $300. Sunny intends to contribute cash of $800. Joe and Sunny are equal owners of MII.

Provide Joes basis in MII upon contribution (i.e., Year 0) of Property A.

Provide Sunnys basis in MII upon contribution (i.e., Year 0) of cash.

Provide MIIs basis in Property A and cash immediately after contribution.

At the end of Year 1, MII had an operating loss of $500. What would be Joes and Sunnys outside basis at the end of Year 1.

Assume at the end of Year 1, MII had no operating income/loss. MII would like to distribute cash to Joe and Sunny and distribute Property A only to Joe. Will this arrangement work? Why? If yes, provide Joes and Sunnys basis in MII at the end of Year 1.

Facts D (S Corporation):

Assume that the facts are the same as noted in Facts C except for the following: Joe intends to contribute Property A with fair market value (FMV) of $800 and basis of $300. At that time of contribution, Property A was encumbered with $300 debt financed from Bank A. Sunny intends to contribute cash of $800. For purposes of this question, Joe and Sunny are equal owners.

Provide Joes basis in MII upon contribution (i.e., Year 0) of Property A.

Provide Sunnys basis in MII upon contribution (i.e., Year 0) of cash.

Provide MIIs basis in Property A and cash immediately after contribution.