Martha and Emma form a business entity called Pitaya Publishers in which they share equally in the profits and losses. Martha contributes $40,000 cash to Pitaya for a 50% ownership interest. Emma contributes equipment with a fair market value of $50,000, an adjusted basis $15,000, and subject to a $10,000 liability for a 50% ownership interest. The business assumes the liability on the equipment.

If the entity is a C-Corporation:

a. What is Martha’s outside basis in her ownership interest in the C- Corporation?

b. What is Emma’s outside basis in her ownership interest in the C- Corporation?

c. At what amount will the C-Corporation book the land?

If the entity is a partnership:

d. What is Martha’s outside basis in her ownership interest in the partnership?

e. What is Emma’s outside basis in her ownership interest in the partnership?

f. At what amount will the partnership book the land?

Answer rating: 100% (QA)

A C corporation or Ccorp is a legal entity in which the owners or shareholders are taxed separately ... View the full answer