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The XYZ partnership has the following balance sheet: Assets Tax Basis FMV Real estate $300,000 $210,000 Liabilities $0 $0 Capital X $100,000 $70,000 Y $100,000

  1. The XYZ partnership has the following balance sheet:

Assets

Tax Basis

FMV

Real estate

$300,000

$210,000

Liabilities

$0

$0

Capital

X

$100,000

$70,000

Y

$100,000

$70,000

Z

$100,000

$70,000

$300,000

$210,000

If Q provides $52,500 of services in exchange for a $25% interest in the partnership, what is the tax effect to Q, X, Y, Z, and XYZ? Assume all of the partners are individuals. How much income does Q recognize? How much gain do X, Y, and Z recognize? How much of a deduction do they get? What basis will XYZ have in the Real estate? What is the balance sheet afterward? If the property is later sold for $210,000, how much gain will each partner recognize? What if it is sold for $180,000?

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