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:

Basis

In finance, basis refers to the difference between the spot price of an asset and its future price, or it can signify the foundation or underlying principle for something.

Risk-free Interest Rate

The risk-free interest rate is the return on investment with no risk of financial loss, typically represented by the yields of government bonds of stable countries.

Gold Futures

Contracts for the future delivery of gold at a specified price, used for hedging and investing purposes.

Arbitrage Profit

The profit made from buying and selling equivalent financial instruments or capitalizing on price differences in different markets to generate a risk-free return.