Question

1. ________ Wally owns a 53% interest in the Hunter Partnership. He sells land to the partnership for $150,000. The land is worth $150,000 and has a basis to Wally of $160,000. One year later, Hunter Partnership sells the land to a third party for $152,000. One of the results of these transactions is that:

a. Hunter Partnership has a recognized gain of $2,000.

b. Hunter Partnership has a recognized loss of $8,000.

c. Wally has a recognized loss of $10,000.

d. Hunter Partnership has no recognized gain or loss

2. ________ Wilma’s adjusted basis in a partnership is $48,000 before receiving a proportionate current distribution of: (1) land with an adjusted basis to the partnership of $24,000 and a FMV of $19,000; and (2) inventory with an adjusted basis to the partnership of $28,000 and a FMV of $74,000. What are Wilma’s bases in the land and her partnership interest after the distribution?

Partnership

Land Interest           

1.       $24,000                                   $0
2.       $20,000                                   $0
3.       $19,000                                   $0
4.       $19,000                                   $1,000

3. ________ Fox and Mason formed Andy Partnership in 2019. Fox contributed $40,000 cash. Mason contributed property with an adjusted basis of $40,000 and a FMV of $60,000. The property was subject to a $20,000 mortgage which was assumed by the partnership. Fox and Mason agree to split the liabilities, profits, and losses equally. What are Fox’s and Mason’s bases in the Andy Partnership immediately after the transfer?

Fox                              Mason            

1.       $50,000                       $30,000
2.       $40,000                       $40,000
3.       $40,000                       $50,000
4.       $30,000                       $50,000

Answer 1

Answer to 1.

Basis is taken as original basis which is $160,000 and when sale is done for $152,000. Then there will be recognized loss of $8,000.

b. Hunter Partnership has a recognized loss of $8,000.

Answer to 2.

Basis in firm = adjusted basis - adjusted basis of assets received

= $48000 - ($24000+$28000)

= -$4000

= Zero (basis in firm taken $0 as when it is less than zero)

Land Interest is the adjusted basis of the firm which is $24000

So Option A is correct, Land Interest $24,000 & partnership $0

Answer to 3.

Masan Contributed (basis)= $40,000 - $20,000 mortgage

= $20,000

Fox = $40,000 Cash + 50% of (FMV of asset - adjusted basis) = $50,000

Masan = $20,000 + 50% of (FMV of asset - adjusted basis) = $30,000

So option A is correct, Fox $50,000 & Masan $30,000