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.

• How much gain or loss will Liz, John, and the partnership realize?
• How much gain or loss will Liz, John, and the partnership recognize?
• What bases will Liz and John take in their partnership interests?
• What bases will LJ take in the assets it receives?
• Are there any differences between inside basis and outside basis? Explain.
• How will the partnership depreciate any assets it receives from the partners?
• Do additional considerations arise because of the difference between the basis and fair market values of the property John contributed? Explain.