Joined: 02 Jan 2011
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Posted: 27 Apr 2012 at 12:05 | IP Logged
Mark and Carl form an 50% and 50% partnership. Carl contributes $15,000 cash and Mark contributes building with a FMV of $15,000 and an adj basis of $10,000. Later, the partnership sells the building for $20,000. How much of the gain on the sale will Mark report? a. 5000 b. 3000 c. 7500
Could you please explain why Mark recognizes 7500, and not 5000? Why does he need to include 2500? Thank you very much!
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Joined: 23 Mar 2011 Location: United States
Online Status: Offline Posts: 91
Posted: 27 Apr 2012 at 19:11 | IP Logged
He recognizes a $5,000 built-in gain, which represents the land appreciation while in his possession. Then he recognizes $2,500, which is half of the $5000, the appreciation while in the 50/50 partnership.
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Topic: Partnership
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