Yong Contributes a Machine Having an Adjusted Basis of $20,000

question 53

Multiple Choice

Yong contributes a machine having an adjusted basis of $20,000 and an FMV of $25,000 for a 10% partnership interest. Yong had taken $10,000 of depreciation prior to the contribution. The partnership has no liabilities. As a result of the contribution, Yong must recognize

• A)no gain or loss.
• B)a $5,000 Sec. 1245 gain.
• C)a $5,000 capital gain.
• D)$10,000 ordinary income.

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Definitions:

Oral Auctions

Public sales where goods or services are sold to the highest bidder through verbal bids.

Withhold Information

The act of intentionally not sharing information that may be relevant or required by others for decision-making or other purposes.

Common-value Auction

An auction format where the item for sale has essentially the same value to all bidders, but the exact value is unknown until after the purchase.

Exact Value

The precise numerical quantity or measurement of an item or variable, often crucial in calculations or analyses.