Question

X Partnership sold equipment for $30,000 in the current year. The equipment was contributed by Nat, a 50% partner. At the time of contribution the equipment had an adjusted basis of $40,000 and a fair market value of $35,000. As a result of the sale, what loss must be reported on Nat's personal tax return?

a		$2,500
b		$5,000
c		$7,500
d		$10,000

Answer 1

At the time of contribution equipment cost as follows:

Adjusted Basis = $40,000

Fairmarket Value = $ 35,000

When the partner has contribution is other than cash then the contribution can be recorded at the fairvalue

since fairvalue of equipment of is less than the fairvalue then $5000 loss to be recorded in the personal books of the partner Nat,

When the time of sale of the equipement

Fair value = $35,000

Sale Value = $ 30,000

So loss is $ 5,000

the partnership has to book an loss of $5,000.

loss of partnership can't be shared between partners only profits only divided into personal tax purpose.

so $ 5,000 to be recorded in Personal Tax pf partner Nat.