Jiang Contributes Land with an Adjusted Basis of $85,000 and a Fair

question 98

Essay

Jiang contributes land with an adjusted basis of $85,000 and a fair market value of $100,000 to a business entity in which she is an 80% owner on the first day of the tax year. Discuss the tax consequences to Jiang if the business entity sells the land six months later for $120,000 if:

a. The business entity is a partnership.
b. The business entity is a C corporation.
c. The business entity is an S corporation.

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Definitions:

Current Liabilities

Financial responsibilities that must be settled within a year or during the standard operational cycle.

Statement of Financial Position

Another term for the balance sheet, detailing a company's assets, liabilities, and shareholders' equity at a specific point in time.

Liquidity

A measure of how easily assets can be converted into cash without affecting their market price.

Current Assets

Assets that a company expects to convert into cash, sell, or consume within one year or its normal operating cycle, whichever is longer.