1) Owen owns 60 percent of the Big Time partnership. He sells to the partnership a machine for $70,000 that has a $45,000 basis. What would the taxable income be for Owen and what is the partnership's basis in the machine?
a. $25,000; $45,000
b. $0; $45,000
c. $25,000; $70,000
d. None of the above is correct.
2) In 2011, Tim sells Section 1245 property for $28,000 that he had purchased in 2007. Tim has claimed $5,000 in depreciation on the property and originally purchased it for $15,000. How much of the gain is taxable as ordinary income?
a. $5,000
b. $8,000
c. $18,000
d. $13,000
e. None of the above is correct.