Question

Tyler and Josie formed a partnership. Tyler received a 25 percent interest in partnership capital and profits in exchange for land with a basis of $40,000 and a fair market value of $60,000. Josie received a 75 percent interest in partnership capital and profits in exchange for $180,000 of cash. Three years after the contribution date, the land contributed by Tyler is sold by the partnership to a third party for $76,000. How much taxable gain will Tyler recognize from the sale

Answer 1

Answer:

Taxable gain  =   $76,000 - $60,000 =  $16,000

Explanation:

At the time of receiving the land from the partnership the market value is $60,000 aa gaianst the cost of $40,000.   The partners would have valued the land at market value before giving it to Tyler. therefore the cost of land to Tyler will be $60,000 and not $40,000.

Answer 2

Answer:

$24000

Explanation:

Section 704(C)(1)(A) requires that any pre contribution gain must be allocated entirely to Tyler. Therefore, Tyler is allocated the $20,000 pre contribution gain and 25% of 76000-60000= 16000 post contribution gain

20000 + 4000

$24000