Chase, Marty and Barry Form a Partnership

question 91

Multiple Choice

Chase, Marty and Barry form a partnership. Barry will contribute a building worth $240,000 (adjusted basis of $110,000) , inventory worth $55,000 (adjusted basis of $30,000) and $15,000 in cash for a 25% interest in the partnership. How much gain will Barry have to recognize from the exchange of his property for the partnership interest?

• A)$-0-
• B)$125,000 ordinary gain.
• C)$130,000 long-term capital gain.
• D)$5,000 ordinary gain.
• E)$130,000 long-term capital gain and $5,000 ordinary loss.

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Definitions:

Inventory

The complete list of items such as property, goods in stock, or the contents of a building.

Disposable Income

Disposable income is the amount of money individuals or households have available for spending and saving after income taxes have been accounted for.

Disposable Income

The amount of money that households have available for spending and saving after income taxes have been accounted for, serving as an indicator of economic health.

Savings

Money that is set aside from income not used for consumption, which may be stored for future expenses, investments, or emergencies.