On February 1,2009, Kay and Larry form the KL. General Partnership as equal partners by contributing the following assets:

Partner Asset Basis FMV

Kay Equipment $40,000 $50,000

Larry Land $20,000 $110,000

Kay purchased the equipment on December 15,1996, for $$75,000. Larry purchased the land on March 5,1983 , and it is subject to a $60,000 liability, which the partnership assumes. Use this information to answer the following 5 questions.

1. What is each partners realized and recognized gain or loss?
2. what is each partners basis in his/her partnership interest? when does his/her holding period begin?
3. prepare the partnerships tax balance sheet.
4. prepare the partnerships FMV balance sheet.
5. If each partner sells his partnership interest tomorrow how much gain or loss will he/she recognize? how do these gains relate to those in question 1?