Note: FMV = fair market value, AB = adjusted basis

Q1: LO. 4 Chip and Marty form an equal partnership with a cash contribution of $200,000 from Chip and a property contribution ( AB of $100,000, FMV of

$200,000) from Marty.

What is Chips basis in his partnership interest?

What basis does the partnership take in the property transferred by Marty?

Q2: LO. 4 Carol and Connie formed the equal C&C Partnership on January 1 of the current year. Carol contributed $30,000 cash and land with a FMV of

$60,000 and an AB of $40,000. Connie contributed equipment with a FMV of

$90,000 and an AB of $30,000. Connie had previously used the equipment in her sole proprietorship.

How much gain or loss will Carol, Connie, and the partnership recognize?

What bases will Carol and Connie take in their partnership interests?

What bases will C&C take in the assets it receives?

Q3: LO. 4, 8, 12 Beth and Ben are equal partners in the BB Partnership, formed on June 1 of the current year. Ben contributed land that he inherited from his father three years ago. Bens father purchased the land in 1950 for

$6,000. The land was worth $50,000 when Bens father died. The FMV of the land was $75,000 at the date it was contributed to the partnership. Beth has significant experience developing real estate. After the partnership is formed, she will prepare a plan for developing the property and secure zoning approvals for the partnership. She would normally bill a third party $25,000 for these efforts. Beth will also contribute $50,000 of cash in exchange for her 50% interest in the partnership. The value of her 50% interest is $75,000.

How much gain or income will Beth recognize on the formation of the partnership? What is the character of any gain or income recognized?

What basis will Beth take in her partnership interest?

Q4: LO. 4, 10, 14 Continue with the facts presented in Q 6 and 7 re Ben and Beth. At the end of the first year, the partnership distributes $50,000 of cash to Ben. No distribution is made to Beth.

How much income or gain would Ben recognize as a result of the payment?

What basis would the partnership take in the land Ben contributed?