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:

Integrating

The act of combining or incorporating elements together into a unified or cohesive whole.

Perceived Dependency

Perceived Dependency refers to the extent to which individuals believe they rely on others or external factors for support, resources, or decision-making.

Doing Favors

Acts of kindness or assistance typically performed without expecting anything in return.

Building Reputations

involves the process of developing perceptions or opinions about an entity's character or quality, based on past actions and behaviors.