Liz and John formed the equal LJ Partnership on January 1 of the current year. Liz contributed $80,000 of cash and land with a fair market value of $90,000 and an adjusted basis of $75,000. John contributed equipment with a fair market value of $170,000 and an adjusted basis of $20,000. John had used the equipment in his sole proprietorship.

a. How much gain or loss will Liz, John, and the partnership realize?

Liz realizes a gain of $ ? on contribution of the land. John realizes a gain of $ ? on contribution of the equipment.

The partnership realizes a gain equal to the value of the property it receives .

d. What 704(b) book basis will Liz and John take in their partnership interests?

$ ?

e. What bases will the partnership take in the assets it receives?

The partnership will take a $ ? carryover basis in all the assets it receives.

h. Do additional considerations arise because of the difference between the basis and fair market values of the property John contributed?

John's property has a $fill in the blank gain, so note that the partnership must allocate the depreciation expense between the partners in accordance with the 704(c) Regulations.