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Learning Objectives
1.
2.
3.
4.
5.
6.
Flow-Through Entities
20-3
Entity approach
Aggregate approach
Treats
20-4
20-5
Partnership Formations
Contributions
20-6
20-7
Partnership Formations
Contributions of Property (when partnership does not
assume debt)
Partners tax basis
Partnership Formations
Recourse debt
Nonrecourse debt
20-9
Partnership Formations
20-10
Partnership Formations
20-11
20-12
Example 20-5
Nicole contributed $10,000 of cash and land with a
fair market value of $150,000 and adjusted basis of
$20,000 to CCS when it was formed. The land was
encumbered by a $40,000 mortgage executed
three years before. Assume Sarah and Chanzz
Inc., but not Nicole, personally guarantee all
$100,000 of CCS's debt ($60,000 bank loan +
$40,000 mortgage on land). How much gain, if any,
would Nicole recognize on her contribution to CCS
and what would be the basis in her CCS interest?
20-13
Example
Troy, Peter, and Sarah formed Picture Perfect general
partnership. When it was formed, the partners received equal
profits and capital interests and the following items were
contributed by each partner. Calculate tax basis for Troy and
Peter
Troy - cash of $3,000, inventory with a FMV and tax basis of
$5,000, and a building with a FMV of $22,000 and adjusted
basis of $10,000. Additionally, the building was secured by a
$10,000 nonrecourse mortgage.
Peter - cash of $5,000, accounts payable of $12,000
(recourse debt for which each partner becomes equally
responsible), and land with a FMV of $27,000 and tax basis of
$20,000.
20-14
Partnership Formations
Contribution
of Services
Capital
20-15