Mary and Scott formed a partnership that maintains its records on a calendar-year basis. The balance sheet of the MS Partnership at year-end is as follows: Cash Land Inventory Basis $120 60 36 $ 216 $108 108 $216 Pair Market Value $ 120 144 18 $ 282 $ 141 141 $ 282 Mary Scott At the end of the current year, Kari will receive a one-third capital interest only in exchange for services rendered, Kari's Interest will not be subject to a substantial risk of forfelture and the costs for the type of services she provided are typically not capitalized by the partnership. For the current year, the income and expenses from operations are equal. Consequently, the only tax consequences for the year are those relating to the admission of Kari to the partnership. (Leave no answer blank. Enter zero if applicable. Do not round intermediate calculations.) a. Compute and characterize any gain or loss Kari may have to recognize as a result of her admission to the partnership. Gain or loss recognized Mary and Scott formed a partnership that maintains its records on a calendar-year basis. The balance sheet of the MS Partnership at year-end is as follows: Fair Market Value $ 120 Cash Land Inventory 144 Basis $120 60 36 $216 $108 108 $216 Mary Scott 18 $ 282 $ 141 141 $ 282 At the end of the current year, Kari will receive a one-third capital interest only in exchange for services rendered. Kari's interest will not be subject to a substantial risk of forfeiture and the costs for the type of services she provided are typically not capitalized by the partnership. For the current year, the income and expenses from operations are equal. Consequently, the only tax consequences for the year are those relating to the admission of Kari to the partnership. (Leave no answer blank. Enter zero if applicable. Do not round intermediate calculations.) b. Compute Kari's outside basis in her partnership interest Basis c. Prepare a balance sheet of the partnership immediately after Kari's admission showing the partners' tax capital accounts and capital accounts stated at fair market value. MS Partnership Balance Sheet Tax Basis 704(b)/FMV $ 0 $ Assets: Cash Land Inventory Totals Capital Capital Mary Capital-Scott Capital-Kari Totals $ 0 $
