Question

John and Yi formed the X partnership on June 16, 20X6. They agreed.to split profits and losses equally. John contributed $20,000 cash and Yi contributed a machine with a base of 5000 (FMV50000) subject to a mortgage of $30,000 on June 17, 20X6. Yis holding period began on May 2, 20X4.13. The X partnership's tax basis for the property contributed by Yi is:

14. When does X partnerships holding period begin for the property contributed by Yi

15. John's recognized gain is:

Answer 1

1. X partnership's tax basis for the property = $5000(adjusted basis of the machine)

2. X partnership's holding period will begin from the same time when Yi's holding period began. Thus, it will begin from May 2, 20X4

3. John's recognized gain = $ 0. He contributed $20000 and received $15000 from the Yi's mortgage liability for the machine with contribution FMV of $50000. His outside basis is $35000.