Question
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
- 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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