Kay and Larry Each Contribute Property to Become Equal Partners

question 72

Essay

Kay and Larry each contribute property to become equal partners in the KL General Partnership. Kay contributes office furniture with an adjusted basis of $40,000 and an FMV of $50,000, which she has depreciated using MACRS. Larry contributes land with a basis of $60,000 and an FMV of $50,000, which he had been holding as an investment. The partnership will use the land as a parking lot for their business.
a)What is the partnership's basis in each of the two pieces of property?
b)If the land that Larry contributed is sold four years after the contribution for $45,000, what is the amount and character of the gain or loss which Larry should report?

---

Definitions:

Biological Parents

The individuals whose genetic material a person inherits; often referred to as birth parents.

Values

Core beliefs or standards that guide and shape an individual's behavior and decision-making.

Beliefs

Convictions or acceptance that certain things are true or real, often without empirical evidence.

Attitudes

Mental and emotional entities that predispose an individual to respond to other people, objects, or institutions in a positive or negative way.