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?

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Definitions:

Neural Impulses

Electrical signals that travel along neurons, facilitating communication within the brain and between the brain and the body.

Unchanging Stimulus

A stimulus that remains constant and does not vary in its presentation, often used in psychological experiments to measure baseline responses.

Just Noticeable Difference

The minimum amount by which stimulus intensity must be changed in order to produce a noticeable variation in sensory experience.

Decibels

A logarithmic unit used to measure the intensity of sound, with zero decibels representing the threshold of hearing.