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:

Crisis Management

The process by which an organization deals with a disruptive and unexpected event that threatens to harm the organization or its stakeholders.

Senior Management

High-level executives responsible for the strategic direction and decision-making in an organization, typically including positions such as CEO, CFO, and other top managers.

Country Concept

An idea or mental image that encompasses the cultural, political, and economic characteristics of a nation.

Global Citizens

Individuals who identify with being part of an emerging world community and whose actions contribute to building this community's values and practices.