The JM Partnership was formed to acquire land and subdivide it as residential housing lots. On March 1, 2020, Jessica contributed land valued at $604,000 to the partnership in exchange for a 50% interest. She had purchased the land in 2012 for $422,800 and held it for investment purposes (capital asset). The partnership holds the land as inventory.

On the same date, Matt contributed land valued at $604,000 that he had purchased in 2010 for $724,800. He became a 50% owner. Matt is a real estate developer, but he held this land personally for investment purposes. The partnership holds this land as inventory.

In 2021, the partnership sells the land contributed by Jessica for $634,200. In 2022, the partnership sells the real estate contributed by Matt for $573,800.

a. What is each partner's initial basis in his or her partnership interest?

Jessica's initial basis is $fill in the blank.

Matt's initial basis is $fill in the blank.

When property is contributed to a partnership, other issues arise, including depreciation and cost recovery of the assets, character of any subsequent gain or loss on disposition of the assets, and allocations related to the precontribution gain or loss inherent in the property.

b. What is the amount of gain or loss recognized on the sale of the land contributed by Jessica? What is the character of this gain or loss?

The amount of the gain recognized on the sale of the land contributed by Jessica is $fill in the blank, and the type is ordinary income .

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Partially correct

c. What is the amount of gain or loss recognized on the sale of the land contributed by Matt? What is the character of this gain or loss?

The amount of the loss recognized on the sale of the land contributed by Matt is $fill in the blank, and the type is -----------.

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Partially correct

d. How would your answer in (c) change if the property was sold in 2027?

The amount of the loss recognized on the sale of the land contributed by Matt is $fill in the blank, and the type is ordinary loss .