Sam, Sue, and Shelley formed a partnership. Sam received a 50 percent interest i

Question

Sam, Sue, and Shelley formed a partnership. Sam received a 50 percent interest in the partnership in exchange for land with an adjusted basis to him of $30,000 and a fair market value of $50,000. Sue received a 25 percent interest in the partnership in exchange for $25,000 of cash. Shelley received a 25 percent interest in the partnership in exchange for $25,000 of cash. Six years after the date of contribution, the land contributed by Sam was sold by the partnership to an unrelated third party for $90,000. How much gain was required to be allocated to Sam as a result of the sale by the partnership?

a.             $20,000

b.            $30,000

c.             $40,000

d.            $60,000

Explanation / Answer

Ans. b $30,000 Total Gain to sell of land (90000 - 30000) = 60000 Sam's part in partnership firm   = 50% Gain allocated to Sam   =   60000 * 50% 30000 *Cost of the land contributed by Sam = 30000 *Sale of land to third party   =   90000

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