ACCT 540

Partnership Formations Problem - This is the topic. This is for Advance Income Tax Accounting class.

Mary and Todd form the MT Partnership, with a transfer of the following properties:

Mary $1,200,000 cash

Todd $800,000 FMV property

$300,000 tax basis

Mary will receive 60% and Todd 40% of the partnership interests.

Complete the following

Mary Todd

Realized gain ________ ________

Recognized gain ________ _________

Basis of PS interest _________ _________

MT basis in contributed asset __________ _________

VARIATION 1: return to original facts. Todds property is valued at $1,100,000 but is contributed subject to a $300,000 liability. Based on the debt sharing rules of Section 752, Todds share of the debt is 40% after formation and Marys share is 60%.

Complete the following

Mary Todd

Realized gain ________ ________

Recognized gain ________ _________

Basis of partnership interest _________ _________

MT basis in contributed asset __________ _________

VARIATION 2: Same as Variation 1 except Todds property is valued at $1,200,000 and is contributed subject to a liability of $400,000. The debt shares are again 60/40.