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.

16. .Iohn's tax basis for his partnership interest is:

17.

The X pertnership recognized gain or loss is:

Answer 1

Yi's Outside basis:

1.Adjusted basis of land = $5000

2.portion of liability from the mortgage(1/2 of amount)

treated as payment to John = ($15000) [half of 30000]

Total Outside basis of Yi = $0[with $10000 of recognized gain]

John's Outside basis :

1.Cash contribution = $20000

2.portion of Yi's liability from the mortgage(1/2 of amount)

treated as payment from Yi = $15000

Total Outside basis of John = $35000

B. Partnership's gain or loss is not recognized because it gets distributed into the recognized gain and losses of its partners.