George and James are forming the GJ Partnership

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July 9, 2019
Explain your Project Choice: Short Essay
July 9, 2019

George and James are forming the GJ Partnership

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11. George and James are forming the GJ Partnership. George contributes $600,000 cash and James contributes land with an adjusted basis of $400,000 and a fair market value of $750,000. The property is subject to a $150,000 liability, which is also transferred into the partnership and is shared 60% by George and 40% by James for basis purposes. George and James also share 60% and 40% respectively in all partnership profits except for any pre-contribution gain, which must be allocated according to the statutory rules for built-in gain allocations.

a.

?

What is James's adjusted tax basis for his partnership interest immediately after the partnership is formed?

b.

What is the partnership's adjusted basis for the property contributed by James?

c.

?

If the partnership sells the property contributed by James for $800,000, how is the tax gain allocated between the partners