Sue and Andrew form SA general partnership. Each person receives an equal interest in the newly created partnership. Sue contributes $13,000 of cash and land with a FMV of $58,000. Her basis in the land is $23,000. Andrew contributes equipment with a FMV of $15,000 and a building with a FMV of $36,000. His basis in the equipment is $11,000, and his basis in the building is $23,000. How much gain must the SA general partnership recognize on the transfer of these assets from Sue and Andrew?
Multiple Choice
$0.
$4,000.
$48,000.
$52,000.
In the given scenario the SA general partnership will recognize $0 gain on the transfer of these assets because the gain is reported at the time of disposal of the asset rather than at the time of transfer of the assets. The given transaction will result in a carryover basis.
Carryover basis takes place when a property transfer, it also results in a transfer of the transferor's basis in the property. The transferor's basis in the property "carries over" to the transferee.
Hence, option (1) $0 is correct.
Sue and Andrew form SA general partnership. Each person receives an equal interest in the newly...
Boswell and Johnson form a partnership on May 1, 2016. Boswell contributes cash of $74,000; Johnson conveys title to the following properties to the partnership: Book Value Fair Value Land $ 27,000 $ 52,000 Building and equipment 47,000 60,000 The partners agree to start their partnership with equal capital balances. No goodwill is to be recognized. According to the articles of partnership written by the partners, profits and losses are allocated based on the following formula: Boswell receives a compensation...