Marsha Is Going to Contribute the Following Assets to a Business

question 37

Essay

Marsha is going to contribute the following assets to a business entity in exchange for an ownership interest.
Adjusted Basis FMV
Cash $100,000 $100,000
Land and building 60,000 95,000
What are the tax consequences of the contribution to Marsha if the business entity is a(n):
a. Sole proprietorship?
b. General partnership?
c. Limited partnership?
d. C corporation?
e. S corporation?

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Definitions:

Instalment Payments

Payments made periodically towards the settlement of a debt or purchase price, typically including interest.

Interest

The charge for borrowing money or the compensation paid to depositors on their deposits, usually expressed as an annual percentage rate.

Unpaid Balance

The amount of money that is still owed on a loan or credit line that has not yet been paid.

Loan Principal

The amount of money that is borrowed and must be repaid, not including interest or any other charges.