On 8/15/18, Alan and Bethany form a general partnership. Bethany contributes $400,000 cash. Alan contributes a building, with a holding period that started on 4/20/15, with a value of $800,000 and adjusted tax basis of $500,000. The building is subject to a $400,000 recourse mortgage debt. The lender agrees to the assumption of the debt by the partnership and releases Alan from personal liability. The partnership agreement and applicable tax law provide that Alan and Bethany share partnership liabilities equally in accordance with their 50% interests.

a. What are Alan and Bethanys initial capital accounts in the partnership?

b. What are Alan and Bethanys initial outside basis in the partnership?

c. Does Alan recognize any gain on the transfer?

Assume the same facts as above except the building contributed by Alan has a value of $1,200,000 and a basis of $200,000. The building is subject to a $800,000 recourse mortgage debt.

a. What are Alan and Bethanys initial outside basis in the partnership?

b. Does Alan recognize any gain on the transfer? If so, how much?

Assume the same facts as the first question (building basis of $500,000) but the business is a limited liability company and the $800,000 mortgage is a nonrecourse mortgage (i.e., neither Alan or Bethany have any liability if the partnership defaults on the debt).

a. What are Alan and Bethanys initial outside basis in the partnership?

b. Does Alan recognize any gain on the transfer? If so, how much?