On January 1 of the Current Year, Jenna and Rob

question 71

Multiple Choice

On January 1 of the current year, Jenna and Rob form an equal partnership.Jenna makes a cash contribution of $80,000 and a property contribution (adjusted basis of $120,000; fair market value of $160,000) in exchange for her interest in the partnership.Rob contributes property (adjusted basis of $190,000; fair market value of $240,000) in exchange for his partnership interest.Which of the following statements is true concerning the income tax results of this partnership formation?

• A)Jenna has a $200,000 tax basis for her partnership interest.
• B)Rob recognizes a $50,000 gain on his property transfer.
• C)Rob has a $240,000 tax basis for his partnership interest.
• D)The partnership has a $160,000 adjusted basis in the property contributed by Jenna.
• E)None of the statements is true.

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Definitions:

Minority Group

A group of people who, because of their physical or cultural characteristics, are singled out from the others in the society in which they live for differential and unequal treatment.

Commodity

A basic good used in commerce that is interchangeable with other goods of the same type, often applied to raw materials and agricultural products.

Profit

The financial gain realized when the amount earned from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity.

Racial Passing

The act of a person classified as a member of one racial group being accepted or identifying as a member of another, often to escape racial discrimination.