Partnership Formations Problem

Mary and Todd form the MT Corporation, with a transfer of the following properties:

Mary$500,000 cash

Todd$500,000 FMV property

$300,000 tax basis

Both Mary and Todd receive a 50% interest in the partnership.

Complete the following

MaryTodd

Realized gain_______ _______

Recognized gain _______ _______

Basis of Stock _______ _______

MT basis in contributed asset _______ _______

VARIATION 1:In addition to Mary and Todd, Karla joins the corporation at its inception.Karla will provide services to the corporation in exchange for a 25% profits interest in the partnership.That is, she receives 25% of the profits but no share of the capital.What happens to Karla?Does anything change for Mary or Todd?Why or why not? CHECK THE BOOK AS A SOURCE

VARIATION 2:return to original facts (no Karla).Todd's property is valued at $700,000 but is contributed subject to a $200,000 liability.Under partnership debt sharing rules, both Mary and Todd will have a 50% share of the debt.

Complete the following

MaryTodd

Realized gain_______ _______

Recognized gain _______ _______

Basis of Stock _______ _______

MT basis in contributed asset _______ _______

VARIATION 3:return to original facts (no Karla).Todd's property is valued at $1,500,000 but is contributed subject to a $1,000,000 liability.Under partnership debt sharing rules, both Mary and Todd will have a 50% share of the liability.

Complete the following

MaryTodd

Realized gain_______ _______

Recognized gain _______ _______

Basis of Stock _______ _______

MT basis in contributed asset _______ _______