Business & Finance

Emma and Laine form the equal EL Partnership. Emma contributes cash of $100,000. Laine contributes property with an adjusted basis of $40,000 and a fair market value of $100,000.
a. How much gain, if any, must Emma recognize on the transfer? Must Laine recognize any gain? If so, how much?
b. What is Emma’s basis in her partnership interest?
c. What is Laine’s basis in her partnership interest?
d. What basis does the partnership take in the property transferred by Laine?

31. LO.3, 17 Kenisha and Shawna form the equal KS LLC with a cash contribution of $360,000 from Kenisha and a property contribution (adjusted basis of $380,000, fair market value of $360,000) from Shawna.
a. How much gain or loss, if any, does Shawna realize on the transfer? Does Shawna recognize any gain or loss? If so, how much?
b. What is Kenisha’s basis in her LLC interest?
c. What is Shawna’s basis in her LLC interest?
d. What basis does the LLC take in the property transferred by Shawna?
e. Are there more effective ways to structure the formation? Explain.

32. LO.3 Liz and John formed the equal LJ Partnership on January 1 of the current year.
Liz contributed $80,000 of cash and land with a fair market value of $90,000 and an adjusted basis of $75,000. John contributed equipment with a fair market value of $170,000 and an adjusted basis of $20,000. John had previously used the equipment in his sole proprietorship.
a. How much gain or loss will Liz, John, and the partnership realize?
b. How much gain or loss will Liz, John, and the partnership recognize?
c. What bases will Liz and John take in their partnership interests?
d. What bases will LJ take in the assets it receives?
e. Are there any differences between inside and outside basis? Explain.
f. How will the partnership depreciate any assets it receives from the partners?

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