Asked by Alexandra Kostanyan on Jun 25, 2024
Verified
Bryan,Shahin,and Michele form a partnership.Bryan and Shahin contribute inventory and a building,respectively.Michele agrees to perform all of the accounting and office work in exchange for a 10% interest.
FMV Basis Partnership % Bryan’s inventory $300,000$225,00045% Shahin’s building $300,000$125,00045% Michele’s services $0$010%\begin{array}{llll}&FMV&\text { Basis }&\text { Partnership }\%\\\text { Bryan's inventory } & \$ 300,000 & \$ 225,000&45\% \\\text { Shahin's building } & \$ 300,000 & \$ 125,000&45\% \\\text { Michele's services } & \$ 0 & \$0&10\%\end{array} Bryan’s inventory Shahin’s building Michele’s services FMV$300,000$300,000$0 Basis $225,000$125,000$0 Partnership %45%45%10% a.Do any of the partners recognize any gain? If so,how much and why?
b.What is each partner's basis in his or her partnership interest?
c.What is the basis to the partnership of each asset?
Recognize Gain
The process by which an individual or entity reports the profit earned from the sale of an asset that has increased in value over its purchase price.
Partnership Interest
Ownership stake in a partnership, representing rights to its profits and assets.
Accounting Work
The activities involved in maintaining and auditing records and preparing financial reports for a business or individual.
- Comprehend the process and consequences of forming a partnership, including contributions and distributions.
- Familiarize oneself with the principles of partnership basis calculation and its vital importance for tax objectives.
- Recognize the tax effects of non-monetary contributions to a partnership.
Verified Answer
b. Bryan’s partnership basis $225,000 Shahin’s partnership basis $125,000 Michele’s partnership basis $60,000\begin{array}{lr}\text { Bryan's partnership basis } & \$ 225,000 \\\text { Shahin's partnership basis } & \$ 125,000 \\\text { Michele's partnership basis } & \$ 60,000\end{array} Bryan’s partnership basis Shahin’s partnership basis Michele’s partnership basis $225,000$125,000$60,000
c. Inventory $225,000 Building $125,000\begin{array}{ll}\text { Inventory }&\$225,000\\\text { Building }&\$125,000\end{array} Inventory Building $225,000$125,000
Learning Objectives
- Comprehend the process and consequences of forming a partnership, including contributions and distributions.
- Familiarize oneself with the principles of partnership basis calculation and its vital importance for tax objectives.
- Recognize the tax effects of non-monetary contributions to a partnership.
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