Question

Cooke and Thatcher form the C&T Partnership. Cooke contributes equipment with a fair market value of $80,000 and a basis of $35,000, in exchange for an 80 percent interest in the partnership capital and profits. Thatcher performs services worth $20,000 for the partnership in exchange for a 20 percent interest in capital and profits. What is the amount of Cooke’s recognized gain or loss (if any) as a result of the contribution to the partnership in exchange for the partnership interest? What is Cooke’s basis in his partnership interest immediately after the contribution? What is the amount of Thatcher’s recognized income or loss (if any) on the contribution to the partnership? What is Thatcher’s basis in her partnership interest immediately after the contribution? e. What is C&T Partnership’s basis in the equipment received from Cooke?

Answer 1

1) the amount of cooke is recognised gain / loss will be nil = $ 0

2) $ 35,000 the cooke is basis in the partnership imemediately after contribution will be the basis of equipment he contributed

3) $ 20,000 the thatcher's recognised gain or loss will be the amount of services he performed

4) $ 20,000 thacher's basis in her partnership immediately after the contribution will be the value of service rendered by him

5) $ 35,000 the partnership basis on equipment will be same as the basis of the partner contributed it. so the basis of cooke $ 35,000 will be the basis for C&T partnership on equipment