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

question 95

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

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