Nikki and Nancy form N&N; partnership. Nikki contributes $40,000 cash and a buil

Question

Nikki and Nancy form N&N; partnership. Nikki contributes $40,000 cash and a building worth $70,000 ($58,000 adjusted basis) in exchange for a 50% interest in N&N.; Nancy contributes $ 10,000 and land worth $ 100,000 (basis of $ 120,000) in exchange for a 50% interest in N&N.; How much gain or loss do Nikki, Nancy, and N&N; recognize from the transfer? What is Nikkis basis in her partnership interest? What is Nancy's basis in her partnership interest? What is N&N;'s basis in the assets it acquired on the transfer?

Explanation / Answer

a. Nikki should reconize a loss of $ -12,000(58,000-70,000) from the bulding and Nancy should book a profit of $ 20,000(120,000-100,000) and the partnership firm N & N should not reconize any gain or loss.

b.Nikki's basis in her partnership interest is $ 40,000+$58,000= $98,000

c. Nancy's basis in her paartnersship interest is $10,000+120,000= $ 130,000

d.N & N's basis basis in the assets it acquired on transfer is = $58,000+120,000= $ 178,000

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