Liz and John formed the equal LJ Partnership on January 1 of the current year. L

Question

Liz and John formed the equal LJ Partnership on January 1 of the current year.
Liz contributed $80,000 of cash and land with a fair market value of $90,000 and an adjusted basis of $75,000. John contributed equipment with a fair market value of $170,000 and an adjusted basis of $20,000. John had previously used the equipment in his sole proprietorship.

How much gain or loss will Liz, John, and the partnership realize?

How much gain or loss will Liz, John, and the partnership recognize?

What bases will Liz and John take in their partnership interests?

What bases will LJ take in the assets it receives?

Are there any differences between inside and outside basis? Explain.

How will the partnership depreciate any assets it receives from the partners?

Explanation / Answer

Gain or Loss Liz Realise Adjusted basis of Liz = 75000 Cash contribution = 80000 Land = 90000 Loss to Liz = -95000 Gain or Loss John Realise Adjusted basis of John = 20000 Land = 170000 Loss to John = -150000 Gain or Loss Partnership Realise Cash contribution by Liz = 80000 Land by Liz = 90000 Land by John = 170000 Adjusted basis to Liz = 75000 Adjusted basis to John = 20000 Gain to Firm = 245000

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