Chase, Marty and Barry Form a Partnership

question 91

Multiple Choice

Chase, Marty and Barry form a partnership. Barry will contribute a building worth $240,000 (adjusted basis of $110,000) , inventory worth $55,000 (adjusted basis of $30,000) and $15,000 in cash for a 25% interest in the partnership. How much gain will Barry have to recognize from the exchange of his property for the partnership interest?

• A)$-0-
• B)$125,000 ordinary gain.
• C)$130,000 long-term capital gain.
• D)$5,000 ordinary gain.
• E)$130,000 long-term capital gain and $5,000 ordinary loss.

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Definitions:

Carnations

A species of flowering plant in the Dianthus genus, often used in bouquets and floral arrangements.

Imported

Brought into a country from abroad for sale.

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive.

Tariff

A tax imposed by a government on imported or exported goods.