Hello - I need a little help with this question. Thank you. Darrel, Sissy, and C

Question

Hello - I need a little help with this question. Thank you.

Darrel, Sissy, and Carol form a partnership. Darrel and Sissy give equipment and a building, respectively. Carol agrees to perform all of the accounting and office work in exchange for a 10% interest. FMV Basis Partnership % Darrel’s equipment $200,000 $100,000 60% Sissy’s building $100,000 $ 50,000 30% Carol’s services $0 $ 0 10%

a. Do any of the partners recognize any gain? If so, how much? Explain.

b. What is the basis for each partner in his or her partnership interest?

c. What is the basis to the partnership of each asset?

Explanation / Answer

a.Carol recognises a gain of $30,000.

This is because Carol receives a capital interest in exchange of services to the tune of (total FMV of assets * 10%)

=>($200,000 + 100,000)*10%

=> ($300,000)*10%

=>$30,000.

b.basis of each partner is presented below:

c.basis of each partnership asset.

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