TRUE OR FALSE

1.Scott and Paula formed an equal partnership on June 1 of the current year. Scott contributed $5,000 cash and land with a basis of $3,000 and a fair market value of $5,000. Paula contributed equipment with a basis of $2,000 and a value of $10,000. Scott's outside tax basis in his interest is $10,000; Paula's tax basis is also $10,000.

2. Jared contributes land with a value of $70,000 and a basis of $40,000 to the JST partnership in exchange for a 1/3 interest. Four months later, the partnership sells the land for $100,000. Of the gain on the land sale, $40,000 is allocated to Jared.

3.Ed, a partner in the EZ Partnership, receives a proportionate nonliquidating distribution of property having a fair market value of $10,000 and an inside partnership basis of $3,000. Ed's outside basis in his partnership interest is $2,000 before the distribution. In this situation, Ed is limited to a $2,000 basis in the property, Ed's basis in the partnership is reduced to zero, and Ed recognizes no gain on the distribution.

4.Ruth contributed a parcel of real estate for a 25% interest in the J&R Partnership at the beginning of the current tax year. Her basis in the property was $60,000, and the fair market value of the property was $72,000 at the date of the contribution. The partnership sold the property during the year for $72,000. Jane (the other partner who owns a 75% interest in the partnership) will be allocated a gain from the sale in the amount of $9,000 (75% of the $12,000 gain).

5. Brown Corporation purchased 100% of the stock of Black Corporation five years ago for $20,000. Brown Corporation liquidates Black Corporation under Sections 332/337 and acquires assets with a basis to Black Corporation of $50,000 (fair market value of $70,000). Brown Corporation will have a basis in the assets of $20,000, its basis in the stock of Black Corporation.

6. Gain is not recognized to any taxpayer if the parent corporation elects under Section 338 after acquiring a controlling interest in a subsidiary.