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Mario and Luigi Are Brothers and They Are Equal Partners

question 67

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Mario and Luigi are brothers and they are equal partners in Pipes of Your Dreams Plumbing. Mario sells his fancy sports car to the business for $40,000. Mario's basis in the car is $45,000.
a. What is the amount of Mario's recognized gain or loss on this transaction, and what is the nature of the gain or loss?
b. If the partnership later sells the sports car for $55,000, how much of the gain is recognized?


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