Elise Contributes Property Having a $60,000 FMV and a $25,000

question 1399

Essay

Elise contributes property having a $60,000 FMV and a $25,000 adjusted basis and also renders accounting services valued at $30,000 in exchange for an 80% interest in the capital and profits of the EEE partnership. Evan contributes a building with a $90,000 FMV, an adjusted basis of $55,000, and subject to a mortgage of $70,000 for a 20% interest in the capital and profits of the EEE partnership. The partnership assumes the mortgage.
a. What is each partner's respective basis in the partnership?
b. What are the income tax consequences of the contributions?
c. What is the partnership's basis in the assets transferred in by Elise and Evan?

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Definitions:

Budgeted Sales

Projected sales figures used in financial planning and budgeting that estimate future sales during a specific period.

Budgeted Purchases

An estimate of the total purchases a business plans to make during a certain time period.

Amount Collected

The total money received or gathered from various sources, such as payments or sales.

Direct Materials Purchases

The acquisition of raw materials that are directly incorporated into a finished product during the manufacturing process.