Question

On March 1, 2019, George and James form the GJ General Partnership in which they will...

On March 1, 2019, George and James form the GJ General Partnership in which they will share profits and losses equally. George contributes $600,000 in cash and James contributes land with an adjusted basis of $400,000 and a fair market value of $750,000. The land is subject to a qualified nonrecourse mortgage of $150,000.

Required:

  1. How much gain or loss will George, James and the partnership recognize upon the formation of the partnership?
  2. Determine each partner’s basis in his partnership interest.
  3. What is George’s at-risk basis?
  4. What is the partnership’s adjusted basis for the land?
  5. Determine the total outside basis for the partnership.
  6. If the partnership sells the land for $800,000 on May 31, 2020, how much gain will each partner report on his own tax return?   
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