Module 6-1

Homework

Question # 7

2-24-2017

Suzanne and Bob from the SB General Partnership as equal partners. They make the following contributions:

(Click on the icon to view the contributions.)

The SB Partnership assumes the $80,000 recourse mortgage on the building that Bob contributes, and the partners share the economic risk of loss on the mortgage equally. Bob has claimed $ 40,000 in straight-line depreciation under the MACRS rules on the building. Suzanne is a stockbroker and contributed securties from her inventory. The partnership will hold them as an investment.

Requirements a. What amount and character of gain or loss much each partner recognize on the formation of the partnership? (If no gain or loss is recognized by a partner, enter a "0" in the Amount column and select?N/A? in the Character column.)

Individual Amount Character

Suzanne (1)

Bob (2) Requirement b. What is each partner's basis in his or her partnership interest?

Individual Basis in Partnership Interest

Suzanne

Bob

Requirement c and d. What is the partnership's basis in each asset? What is the partnership's initial book value of each asset?

Asset Partnership's Basis in Asset Initial Book Value of Asset

Cask

Inventory

Land

Building

Requirement e. The partnerships hold the securties for two years and them sell them for $ 20,000. What amount and character of gain much the partnership and each partner reports? ( Enter a loss with a minus sign or parentheses.)

The partnership will recognize (6) of $

What is the character of the gain or loss that the partnership and each partner much report?

The gain (loss) is (7) in nature because the property was (8) and because the partnership sold the inventory within (9) years of its contribution.

1: Contributions

Individual Asset Basis to partner FMV

Suzanne Cash $ 45,000 $ 45,000

Inventory (securities) 14,000 15,000

Bob Land 45,000 40,000

Building 50,000 100,000