Dennis, Suzy, and Katherine form a partnership. Dennis and Suzy give equipment and a building, respectively. Katherine agrees to perform all of the accounting and office work in exchange for a 10% interest.

a. Do any of the partners recognize any gain? If so, how much and why?
b. What is the basis for each partner in his or her partnership interest?
c. What is the basis to the partnership of each asset?

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FMV Basis Partnership 90 Dennis's equipment 100,000 10,000 Suzy's building $100,000 S45,000 Katherine's services $0 45% 45% 10% $0