I need help on writing an partnership tax memo

Bull & Bear, LLP

123 High Street Stamford, CT

Tax Memorandum

TO:

File

FROM:

Students Name

DATE:

REFERENCE:

Facts:

Greg, Alex, and Tom formed a general partnership in 2000 which they call Green Mountain Partners. Green Mountain Partners presently owns a bed and breakfast inn located in Quechee, Vermont. The property consists of a twenty-bedroom inn and spa complex, surrounded by twenty five acres of wooded property with walking and riding trails. Greg and Alex each hold a 30 percent capital and profits interest in the partnership, while Tom holds a 40 percent capital and profits interest. Greg holds an adjacent 30-acre piece of undeveloped land which he purchased in 1985 for investment purposes for $350,000. The property presently has no mortgage or other encumbrances on it. Current fair market value of the property is approximately $2,100,000. Greg, Alex, and Tom would like to subdivide Gregs adjacent property and build an active retirement community consisting of 80 single-family homes, a riding stable, indoor swimming pool and gym, plus a recreational center. They estimate that land development and building costs for each home will average about $275,000 each, and can be marketed for approximately $525,000 each.

Issue(s):

Issue 1: If Greg contributed the land to the partnership, Green Mountain Partners would hold the land at what basis? Determine the character and estimate the amount of income/gain to Greg and his partners under this scenario.

Issue 2: If Greg sold the land to the partnership, Green Mountain Partners would hold the land at what basis? Determine the character and estimate the amount of income/gain to Greg and his partners under this scenario. Conclusion: Discussion: