Tim, Al, and Pat Contributed Assets to Form the Equal

question 7

Multiple Choice

Tim, Al, and Pat contributed assets to form the equal TAP Partnership. Tim contributed cash of $40,000 and land with a basis of $80,000 (fair market value of $60,000) . Al contributed cash of $60,000 and land with a basis of $50,000 (fair market value of $40,000) . Pat contributed cash of $60,000 and a fully depreciated property ($0 basis) valued at $40,000. Which of the following tax treatments is not correct?

• A) Tim's basis in his partnership interest is $120,000.
• B) Al realizes and recognizes a loss of $10,000.
• C) Pat realizes a gain of $40,000 but recognizes $0 gain.
• D) TAP has a basis of $80,000, $50,000, and $0 in the land and property (excluding cash) contributed by Tim, Al, and Pat, respectively.
• E) All of these statements are correct.

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Definitions:

Catalytic Acid

An acid that speeds up a chemical reaction without being consumed in the process, by providing protons to facilitate the reaction.

Carboxylic Acid

An organic compound containing a carboxyl group (C(O)OH), known for its acidity due to the hydrogen atom's ability to dissociate from the carboxyl group.

Acid Chloride

Organic compounds derived from carboxylic acids by replacing the hydroxyl group with a chlorine atom, making them highly reactive acylating agents.

Anhydride

A compound formed from another compound by the removal of a molecule of water; commonly associated with carboxylic acid anhydrides in organic chemistry.