Question
Jack. Alex, and Bernie form JAB, an equal, cash method, general partnership Alex contributes equipment held for 15 months with a value of $250,000 and
Jack. Alex, and Bernie form JAB, an equal, cash method, general partnership
Alex contributes equipment held for 15 months with a value of $250,000 and an adjusted basis of $175.000. Alex paid $200,000 for the property and has claimed $25,000 of depreciation. Alex also contributes $150,000 cash.
Bernie contributes non depreciable property purchased 3 years ago for $475,000 for investment purposes. The land has a value of $400,000. The partnership holds the property as inventory Jack contributes non depreciable property that has a value of $400,000 that he purchased 8 months ago for $350,000.
Jack is a dealer in the property purchased (it is inventory to him), but the property is investment property to the partnership.
Assume the property contributed by Jack is sold four years after formation for $450.000.
(1) What is the amount of book and tax gain or loss on the sale.
(2) how is the book and tax gain allocated among the partners (including the character of any tax gain); and
(3) what is the impact on each partner's capital account and tax basis (what is each partner's capital account and basis after the transaction)?
(4) Prepare a balance sheet (book and tax) reflecting the initial formation.
(5) Prepare a balance sheet (book and tax) reflecting the sales transaction.
Step by Step Solution
3.51 Rating (148 Votes )
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started