QUESTION 3 X and Y are 50% equal partners in Z Partnership. X contributes an asset worth $500,000 with an adjusted basis of $100,000. Y contributes $500,000 in cash. The partnership's basis in the asset is $100,000 (carryover basis). If the partnership later sells the asset for $750,000, how much gain must X and Y report? X and Y must each report $325,000 in gain a. X and Y must each report $125,000 in gain O b. X must report $400,000 in gain and Y must report $250,000 in gain C. X must report $525,000 in gain and Y must report $125,000 in gain O d. X must report $650,000 in gain e