Question - Ethyl owns an undeveloped parcel of investment parcel of investment real estate, Blackacre, with a value of $100,000 and a tax basis of $10,000. Fred owns Greenacre, which has the same character, value and basis. Both parcels have been owned for years. Ethyl and Fred form a partnership, contributing their respective parcels. The partnership holds the parcels for investment.
a) How are Ethyl, Fred, and the partnership taxed on the formation of the partnership?
b) If Ethyl were to sell her interest six months later for $150,000, how much would she be taxed?
c) If the partnership were to sell Blackacre six months after the formation of the partnership for $150,000, how would the partnership measure and characterize any recognized gain or loss?
d) How should the gain be allocated between Ethyl and Fred?