Harry and Sally formed the Evergreen partnership by contributing the following assets in exchange for a 50 percent capital and profits interest in the partnership:
Harry: ______________Basis Fair ____________Market Value
Cash ........................$ 30,000 .........................$ 30,000
Land ........................100,000 ..........................120, 000
Totals ...................... $ 130,000 .....................$ 150,000
Sally:
Equipment used in a business ............200,000 ...................150, 000
Totals ...................................... $ 200,000 .................$ 150,000
a. How much gain or loss will Harry recognize on the contribution?
b. How much gain or loss will Sally recognize on the contribution?
c. How could the transaction be structured a different way to get a better result for Sally?
d. What is Harry's tax basis in his partnership interest?
e. What is Sally's tax basis in her partnership interest?
f. What is Evergreen's tax basis in its assets?
g. Following the format in Exhibit 20-2, prepare a tax basis balance sheet for the Evergreen partnership showing the tax capital accounts for the partners?