Question e.

Problem 10-8 Partnership Formation (LO 10.2) Kele and Nova wish to form the Sioux Partnership. Kele contributes property with an adjusted basis of $70,000, a fair market value of $200,000 that is subject to an $80,000 liability in exchange for 40 percent of Sioux. Nova receives a 60 percent interest in Sioux in exchange for providing services worth $10,000 and $170,000 cash. If an amount is zero, enter " 0 ". a. What amount of gain or loss must Kele recognize as a result of transferring the property to the partnership? Feedback check My Work Generally, there is no gain or loss recognized by a partnership or any of its partners when property is contributed to a partnership in exchange for an interest in the partnership. This rule applies to the formation of a partnership as well as any subsequent contributions to the partnership. However, there are exceptions to the nonrecognition rule. On formation, income may be recognized under certain circumstances. To determine the partner's basis in the partnership interest, consider the basis of the property contributed, any recognition of gain as well as any allocable liabilities. When determining the partnership's basis in property contributed by a partner, consider the partner's basis in the property. b. What is Kele's basis in the partnership interest immediately after the formation of the partnership including allocation o partnership liabilities? 1 c. What is the partnership's basis in the property contributed by Kele? 4 d. What is Nova's basis (after considering Kele's liability assumed by the partnership) in the partnership interest immediately after the formation of the partnership including allocation of partnership liabilities? $ e. How much income does Nova recognize on the exchange