Kay and Larry Each Contribute Property to Become Equal Partners

question 72

Essay

Kay and Larry each contribute property to become equal partners in the KL General Partnership. Kay contributes office furniture with an adjusted basis of $40,000 and an FMV of $50,000, which she has depreciated using MACRS. Larry contributes land with a basis of $60,000 and an FMV of $50,000, which he had been holding as an investment. The partnership will use the land as a parking lot for their business.
a)What is the partnership's basis in each of the two pieces of property?
b)If the land that Larry contributed is sold four years after the contribution for $45,000, what is the amount and character of the gain or loss which Larry should report?

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Definitions:

Elaboration

A memory strategy that involves making connections between two or more things to be remembered.

Metamemory

An individual’s knowledge about their own memory abilities and strategies to aid memory, including the understanding of how memory works.

Memory Performance

Refers to the efficiency and accuracy of cognitive processes involved in storing, retaining, and recalling information.

Metamemory

An individual's knowledge and awareness of their own memory capabilities and strategies.