Homework Solutions: Spilker Et Al. Ch. 20
Homework Solutions: Spilker et al. C h. 20
40. Harry and Sally formed the Evergreen partnership by contributing the following assets in exchange for a 50 percent capital and profits interest in the partnership:
Harry:
Cash
Land
Totals
Basis Fair Market Value
$ 30,000
$ 30,000
100,000
120,000
$ 130,000
$ 150,000
Sally:
Equipment used in a business
Totals
200,000
$ 200,000
150,000
$ 150,000
a. How much gain or loss will Harry recognize on the contribution?
b. How much gain or loss will Sally recognize on the contribution?
c. How could the transaction be structured a different way to get a better result for
Sally?
d. What is Harry’s tax basis in his partnership interest?
e. What is Sally’s tax basis in her partnership interest?
f. What is Evergreen’s tax basis in its assets?
g. Following the format in Exhibit 20 -2, prepare a tax basis balance sheet for the
Evergreen partnership showing th e tax capital accounts for the partners.
a. $0.
Generally, partners recognize gain on property contributed to a partnership only when the cash they are deemed to receive from debt relief exceeds their basis in the partnership prior to the deemed distribution . Harry did not have any debt relief.
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b. $0.
Partners may never recognize loss when property is contributed to a partnership even when they are relieved of debt.
c. Sally should consider selling the property to the partnership rather than contributing it. By selling the property, she could recognize the $50,000 built in loss on the equipment.
d. $130,000.
Harry’s basis in his partnership interest is simply the combined tax basis in the cash and land he contributed to the partnership.
e. $200,000.
Sally’s basis in her partnership interest equals $200,000 basis in the equipment she contributed.
f. $330,000.
The partnership’s basis in its assets equals the sum of the partners’ bases in the cash ($30,000), in the land ($100,000), and in the equipment ($200,000).
g.
40. Harry and Sally formed the Evergreen partnership by contributing the following assets in exchange for a 50 percent capital and profits interest in the partnership:
Harry:
Cash
Land
Totals
Basis Fair Market Value
$ 30,000
$ 30,000
100,000
120,000
$ 130,000
$ 150,000
Sally:
Equipment used in a business
Totals
200,000
$ 200,000
150,000
$ 150,000
a. How much gain or loss will Harry recognize on the contribution?
b. How much gain or loss will Sally recognize on the contribution?
c. How could the transaction be structured a different way to get a better result for
Sally?
d. What is Harry’s tax basis in his partnership interest?
e. What is Sally’s tax basis in her partnership interest?
f. What is Evergreen’s tax basis in its assets?
g. Following the format in Exhibit 20 -2, prepare a tax basis balance sheet for the
Evergreen partnership showing th e tax capital accounts for the partners.
a. $0.
Generally, partners recognize gain on property contributed to a partnership only when the cash they are deemed to receive from debt relief exceeds their basis in the partnership prior to the deemed distribution . Harry did not have any debt relief.
1
b. $0.
Partners may never recognize loss when property is contributed to a partnership even when they are relieved of debt.
c. Sally should consider selling the property to the partnership rather than contributing it. By selling the property, she could recognize the $50,000 built in loss on the equipment.
d. $130,000.
Harry’s basis in his partnership interest is simply the combined tax basis in the cash and land he contributed to the partnership.
e. $200,000.
Sally’s basis in her partnership interest equals $200,000 basis in the equipment she contributed.
f. $330,000.
The partnership’s basis in its assets equals the sum of the partners’ bases in the cash ($30,000), in the land ($100,000), and in the equipment ($200,000).
g.