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.

If an amount is zero, enter "0".

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 excess fair market value over carryover basis of property it receives .

b. How much gain or loss will Liz, John, and the partnership recognize?

Liz recognizes ___________. John recognizes _____________ The partnership recognizes _____________.

c. What tax bases will Liz and John take in their partnership interests?

Liz's basis in the partnership is_______ and John's basis is ______in his partnership interest.

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 _______basis in all the assets it receives.

f. Are there any differences between inside basis and outside basis? Each partner's basis in the partnership interest is referred to as basis. The adjusted basis of each partnership asset, as determined from the partnership's tax accounts is referred to as basis.

What is the amount of the partners' inside basis?

What is the amount of the partners' outside basis?

g. How will the partnership depreciate any assets it receives from the partners? Select "Yes" or "No", whichever is applicable.

The partnership will "step into John's shoes" in determining its depreciation expense.
The partnership may choose its own useful life and depreciation method.

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______ precontribution gain, so note that the partnership allocate the depreciation expense between the partners in accordance with the 704(c) Regulations.