Oscar and Frank Form an Equal Partnership, the O and F

question 4

Essay

Oscar and Frank form an equal partnership, the O and F Partnership. Oscar contributes land with an adjusted basis of $45,000, subject to a mortgage of $100,000, in exchange for a partnership interest worth $250,000. Frank contributes cash of $100,000 and performs services for the partnership in exchange for a partnership interest worth $250,000.
a.What is the amount of Oscar's recognized gain or loss (if any) as a result of the contribution to the partnership in exchange for the partnership interest?
b.What is Oscar's basis in his partnership interest immediately after the contribution?
c.What is the amount of Frank's recognized income or loss (if any) as a result of the receipt of the partnership interest in exchange for the cash and services?
d.What is the partnership's basis in the land received from Oscar?

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Definitions:

Stop-Loss Order

A type of order placed with a broker to sell a security when it reaches a certain price, used to limit an investor's loss on a position.

Limit Sell Order

An instruction to sell a security at a specified price or better, ensuring that the sell price is no lower than what the seller has defined.

Gains

The monetary increase in value of an asset or investment over its purchase price.

Maximum Possible Gain

The highest profit that can be achieved in an investment.