Question
Formation of a Parntership. Suzenne and Bob form the SB General Partnership as equal partners. They make the following contributions: Individual Asset Basis to Partner
Formation of a Parntership. Suzenne and Bob form the SB General Partnership as equal partners. They make the following contributions:
Individual | Asset | Basis to Partner | FMV |
Suzanne | Cash | 45,000 | 45,000 |
| Inventory (securities) | 14,000 | 15,000 |
Bob | Land | 45,000 | 40,000 |
| Building | 50,000 | 100,000 |
The SB Partnership assumes the 80,000 recourse mortgage on the building that Bob contributes, and the partners share the economic risk of loss on the mortgage equally. Bob has claimed 40,000 in straight-line depreciation under MACRS rules on the building. Suzanne is a stockbroker and contributed securities from her inventory. The partnership will hold them as an investment.
What amount and character of gain or loss must each partner recognize on the formation of the partnership?
What is each partners basis in his or her partnership interest?
What is the partnerships basis in each asset?
What is the partnerships initial book value of each asset?
The partnership holds the securities for two years and then sells them for 20,000. What amount and character of gain must the partnership and each partner report?
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