Question -
1. Ronald and Roy formed an equal partnership, R&R Partnership, a general partnership, on January 1, 2012. Ronald contributed $100,000 in exchange for his one-half interest in R&R partnership. Roy contributed land worth $100,000 and with an adjusted basis to Roy of $30,000 in exchange for his one-half interest in the partnership. Roy is a real estate developer, and at the time of the contribution, the land was inventory in his hands. The land is a capital asset in the hands of R&R Partnership. If R&R Partnership sells the land in 2018 to an unrelated taxpayer for $180,000,how much gain will be recognized by R&R Partnership and what will be the character of the gain?
a. $80,000, all of which gain will be ordinary income
b. $150,000, all of which gain will be capital gain.
c. $150,000, all of which gain will be ordinary income.
d. $150,000, consisting of $80,000 capital gain and $70,000 ordinary income.
2. At the beginning of 2012, Margaret's adjusted basis in her 30 percent interest in MP Partnership, a general partnership, was $3,000. During 2012, Margaret did not make any additional contributions to MP Partnership, and Margaret's share of MP Partnership liabilities did not change. During 2012, MP Partnership distributed $5,000 to Margaret, and MP Partnership had the following items of partnership income, deduction, gain and loss for 2012:
Taxable income $15,000
Tax-exempt interest $6,000
Section 1231 loss ($10,000)
What is Margaret's adjusted basis in her partnership interest in MP Partnership at the end of 2012?
a. 0.
b. $1,300.
c. $9,000.
d. $2,700.