Jane Contributes Land with an FMV of $100,000 and a Basis

question 58

Essay

Jane contributes land with an FMV of $100,000 and a basis of $40,000 to the Green Partnership in exchange for a 25% partnership interest. The partnership assumes the $80,000 mortgage on the land. Mary has a 25% share of partnership liabilities. The Green Partnership has $8,000 in liabilities immediately before Jane's contribution. What is Jane's basis in her partnership interest?

Identify the disclosure requirements for business combinations as per AASB 3 and understand their significance.

Understand the treatment of gain on bargain purchase and its implications on consolidated financial statements.

Recognize the requirements and implications of asset revaluations within the context of business combinations.

Learn the treatment of transactions affecting retained earnings and share capital post-acquisition.

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Definitions:

Passive Continental Margin

The transition between oceanic and continental lithosphere that is not an active plate margin; these regions typically experience little to no tectonic activity.

Plate Boundaries

Regions where two tectonic plates meet, characterized by seismic and volcanic activity due to plate interactions.

Red Circle

A geometric shape defined by all points in a plane at a constant distance from a specific point (the center) with a reddish hue.

Volcanic Activity

The process by which magma and associated gases rise to the Earth's surface through a volcano or other vent, resulting in eruptions that can impact climate, geography, and ecosystems.