Question

Bob contributed to the AlphaBeta Partnership, a general partnership, a building with an adjusted basis to...


Bob contributed to the AlphaBeta Partnership, a general partnership, a building with an adjusted basis to Bob of $50,000 and a fair market value of $150,000 that was subject to a mortgage of $120,000 in exchange for a 50 percent interest in the AlphaBeta Partnership. The AlphaBeta Partnership will assume the mortgage on the building. At the same time, Al contributed to AlphaBeta Partnership cash of $30,000 in exchange for the other 50 percent interest in the AlphaBeta Partnership. In addition to the section or sections that are relevant under question 5, above, which of the following Code Sections is or are also relevant to the determination of whether or not Bob recognizes any gain or loss on this transaction?
a. Only Code Section 751(b).
b. Only Code Sections 751(b), 733, and 705(a).
c. Code Sections 751(b), 733, 705(a) and 731(a).
d. None of the above


Bob contributed to the AlphaBeta Partnership, a general partnership, a building with an adjusted basis to Bob of $50,000 and a fair market value of $150,000 that was subject to a mortgage of $120,000 in exchange for a 50 percent interest in the Alpha Partnership. Alpha will assume the mortgage on the building. At the same time, Al contributed to AlphaBeta Partnership cash of $30,000 in exchange for the other 50 percent interest in the AlphaBeta Partnership. Which of the following Code Sections is or are relevant to the determination of Bob’s basis in his partnership interest upon completion of this transaction?  
a. Only Code Section 722.
b. Only Code Section 1012(a).
c. Only Code Sections 1012(a) and 722.
d. Code Sections 1012(a), 722, and 705(a).

Homework Answers

Answer #1

Question 1:

Anwser: None of the above

Reason:

a)

To determine whether or not Bob should recognized gain or loss, the relevant section is 351. Per section 351, there would be no gain or loss recognized when a property is transferred in exchange for control of a company. Control is when the transferor acquired more than or equal to 80% of voting rights. In this case, since Bob acquired 50% voting rights, he will have to recognize gain or loss on the transfer. Further, per section 357(c), when section 351 applies and there is also assumption of liability, if the liability assumed is in excess of the adjusted basis , the excess should be recognized as a gain by the transferor.

Question 2:

Which of the following Code Sections is or are relevant to the determination of Bob’s basis in his AlphaBeta Corporation stock as the result of this transaction?

Answer: (a): Only Code Section 722

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Bob contributed to AlphaBeta Corporation a building with an adjusted basis to Bob of $50,000 and...
Bob contributed to AlphaBeta Corporation a building with an adjusted basis to Bob of $50,000 and a fair market value of $150,000 that was subject to a mortgage of $120,000 in exchange for 50 percent of the voting common stock (the only class of stock) of the AlphaBeta Corporation. The AlphaBeta Corporation will assume the mortgage on the building. As part of the same transaction, Al contributed to AlphaBeta Corporation cash of $30,000 in exchange for the other 50 percent...
Partnership Al, Bob and Chad agree to form a partnership; Al will invest a building with...
Partnership Al, Bob and Chad agree to form a partnership; Al will invest a building with a fair value of $150,000 and a basis of 35,000 and a mortgage of 30,000. Bob will invest inventory and supplies with a fair value and basis of 75,000 and Chad will allow the partnership to use a copyright worth 25,000 that he created and will do the legal work to set up the partnership. For the legal work he would ordinarily charge 25,000....
Bob, Joe, Sam, and Cassie operate an equal partnership. Joe contributed a building (basis of $75,000...
Bob, Joe, Sam, and Cassie operate an equal partnership. Joe contributed a building (basis of $75,000 and FMV $100,000) at the time of contribution and has held it as a capital asset prior to the contribution. The building was depreciated by the partnership for tax purposes using the straight-line method at a rate of $1,923 per year with a life of 39 years. After five years worth of depreciation had been allowed with respect to the building and at a...
Bob, Joe, Sam, and Cassie operate an equal partnership. Joe contributed a building (basis of $75,000...
Bob, Joe, Sam, and Cassie operate an equal partnership. Joe contributed a building (basis of $75,000 and FMV $100,000) at the time of contribution and has held it as a capital asset prior to the contribution. The building was depreciated by the partnership for tax purposes using the straight-line method at a rate of $1,923 per year with a life of 39 years. After five years worth of depreciation had been allowed with respect to the building and at a...
ABC Partnership was formed on March 1 of the current year by three individuals. A contributed...
ABC Partnership was formed on March 1 of the current year by three individuals. A contributed $20,000 cash for a 25% interest. B contributed property with an adjusted basis of $28,000 and fair market value of $32,000, subject to a $12,000 mortgage. C contributed property with an adjusted basis of $20,000 and fair market value of $64,000, subject to a $24,000 liability. B and C received 25% and 50% partnership interests, respectively. The partnership assumed both partners' liabilities. The partnership...
On January 1, Ryan and James decided to open a Peruvian chicken restaurant (yum!). Ryan contributed...
On January 1, Ryan and James decided to open a Peruvian chicken restaurant (yum!). Ryan contributed the building and land for the restaurant that had a fair market value of $160,000 and adjusted tax basis of $140,000 for a 50 percent profits interest and capital interest. The building had a $50,000 mortgage on it. James contributed $40,000 of cash for a 50 percent profits interest and capital interest. Should the company fail to pay the mortgage, the creditor is only...
On September 1, 2013, Leonard contributed land held for investment with a fair market value of...
On September 1, 2013, Leonard contributed land held for investment with a fair market value of $200,000 and an adjusted basis to him of $120,000 for a 20 percent interest in the income and capital of Office Complex Partnership. The land was intended for use as a building site for the partnership. The partnership opted to rent facilities and on September 2, 2018, sold the contributed land for $500,000. Assuming the partnership agreement was silent with respect to this particular...
Krypton Partnership owns and operates an office building in the medical district of a large city....
Krypton Partnership owns and operates an office building in the medical district of a large city. The property was contributed to the partnership several years ago by partner K. Under the terms of the partnership agreement, K is allocated 20% of the partnership’s profits, gains, losses and deductions, other than depreciation. Depreciation is allocated 50% to K and 50% to the other partners. The office building is encumbered by a nonrecourse mortgage of $750,000. Its tax basis is $650,000 and...
Mary and Bob have been married for 25 years. They are both college professors. Mary (50...
Mary and Bob have been married for 25 years. They are both college professors. Mary (50 years of age) makes $65,000 annually and Bob (60 years of age) makes $75,000 annually. Their oldest daughter is getting married. Bob and Mary would like to either 1) take out a second mortgage on their home (they can get an interest rate of 7 percent) or 2) withdraw funds from their IRAs or 3) sell their rental property. The cost of the wedding...
A, B, C, & D (all individuals) form a general partnership in which they each have...
A, B, C, & D (all individuals) form a general partnership in which they each have an equal interest in capital and profits. All the partners and the partnership are cash method taxpayers. In exchange for their respective partnership interest, each partner transfers the following assets, all of which have been held more than 2 years. PartnerAssetsAdjusted BasisFair Market Value ALand $30,000$70,000 Goodwill$0$30,000 BEquipment(S 1245 gain) $25,000$45,000 Installment note from The sale of land $20,000$25,000 Inventory$5,000$30,000 CBuilding$25,000$60,000 Land$25,000$10,000 Receivables for...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT