Gary and JD are entering into business and are deciding between an S$-$Corp and a general partnership as the entity form in which to operate. Gary is contributing the following assets:

Asset Basis FMV

Cash $60,00060,000$

Inventory $20,00030,000$

Equipment $17,00050,000$

Building $60,000140,000$

The cost of the equipment was $$70,000.$ The cost of the Building was $$90,000$

JD is contributing consulting and professional services worth $$186,000$ because he is a patent attorney and CPA with significant experience with startup businesses.

Gary will own $60\%$ of the business and JD will own $40\%.$ They will share in profit, losses and distributions based on their ownership percentages. They will only receive a partnership interest or stock at formation, respectively. They will both receive a capital interest in the respective assets of the entity upon formation.

REQUIRED: Assuming Gary and JD form a general partnership entitled GJ Partners, what will be the amount and character of any gains or losses recognized by each partner at formation?

REQUIRED: Assuming Gary and JD form a general partnership entitled GJ Partners, prepare a balance sheet as of the formation assuming the services are capitalized as startup expenditures and that the entity borrowed $$80,000$ on a line of credit on the formation date

REQUIRED: Assuming Gary and JD form an S$-$Corp entitled GJ$,$ Inc., what will be the amount and character of any gains or losses recognized by each shareholder at formation?