Problem:
Jessica and Dan formed a partnership. Jessica received a 50% interest in partnership capital and profits in exchange for contributing land (basis of $20,000 and a fair market value of $100,000). Dan received a 50% interest in partnership capital and profits in exchange for contributing $100,000 cash. Three years after the contribution date, the land contributed by Jessica is sold by the partnership to a third party for $200,000.
Required:
How much taxable gain will Jessica recognize from the sale?
- $50,000
- $90,000
- $100,000
- $120,000
- None of the above
Note: Please show the work not just the answer.