Sue and Andrew Form SA General Partnership

question 88

Multiple Choice

Sue and Andrew form SA general partnership. Each person receives an equal interest in the newly created partnership. Sue contributes $10,000 of cash and land with a FMV of$55,000. Her basis in the land is $20,000. Andrew contributes equipment with a FMV of$12,000 and a building with a FMV of $33,000. His basis in the equipment is $8,000, and his basis in the building is $20,000. How much gain must the SA general partnership recognize on the transfer of these assets from Sue and Andrew?

• A) $48,000.
• B) $4,000.
• C) $0.
• D) $52,000.

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Definitions:

Profitability Index

A financial tool used to evaluate the desirability of an investment, calculated as the present value of future cash flows divided by the initial investment cost.

Cash Inflows

Money received by a business from its operational, financing, or investment activities.

Investment Projects

Initiatives undertaken by a business or organization to invest in new assets, technology, or resources with the expectation of generating future benefits.

Total-Cost Approach

A pricing strategy that considers all costs associated with producing and delivering a product or service to determine its selling price.