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Sue and Andrew form SA general partnership. Each person receives an equal interest in the newly...

Sue and Andrew form SA general partnership. Each person receives an equal interest in the newly created partnership. Sue contributes $27,000 of cash and land with a FMV of $72,000. Her basis in the land is $37,000. Andrew contributes equipment with a FMV of $29,000 and a building with a FMV of $50,000. His basis in the equipment is $25,000, and his basis in the building is $37,000. How much gain must the SA general partnership recognize on the transfer of these assets from Sue and Andrew?

Multiple Choice

  • $0.

  • $4,000.

  • $48,000.

  • $52,000.

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Answer #1

Solution:

Answer: $0

Explanation: The SA general partnership will not recognize any gain on the transfer of the assets from Sue and Andrew because the partnerships does not recognize any gain on the contribution of appreciated properties by the partners. The partnerships only carries over the basis from the contributing partners. Thus, we can conculde that no gain will be recognized by the SA general partnership on transfer of assets from Sue and Andrew and hence the answer is $0.

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