Question 1: Denise contributes the following assets to a partnership in exchange for a 25% partnership interest. What is Denise's beginning basis in her partnership interest?
Question 2: On June 1 of the current year, Patti contributes equipment with a $45,000 basis and a $35,000 FMV in exchange for a partnership interest. She purchased the equipment three years ago.
a. What is Patti's basis in her partnership interest?
b. What is Patti's holding period of her partnership interest?
c. What is the basis of the equipment in the hands of the partnership?
d. What is the holding period of the equipment in the hands of the partnership?
e. How will the partnership depreciate the equipment in the year of contribution?
Question 3: Barry and Kurt are equal partners in the BK Partnership. Barry receives a guaranteed payment of $55,000. In addition to the guaranteed payment, Barry withdraws $10,000 from the partnership. The partnership has $24,000 in ordinary income during the year.
a. How much income must Barry report from BK Partnership?
b. What is the effect on Barry's partnership basis?
Question 4: Determine the basis of stock in the hands of the shareholder in each of the following instances. Assume that the 80% rule is met in all cases.
a. Contribution of property with a basis of $1,000 and an FMV of $1,400.
b. Contribution of property with a basis of $3,000 and an FMV of $3,800. The stockholder also received $500 cash from the corporation as part of the stock transaction.
c. Contribution of property with a basis of $8,200 and an FMV of $12,500. The stockholder also received property with an FMV of $1,700 from the corporation as part of the stock transaction.
d. Contribution of a building with an FMV of $200,000, a mortgage (assumed by the corporation) of $100,000, and a basis of $125,000.
e. Contribution of a building with an FMV of $1,700,000, a mortgage (assumed by the corporation) of $1,000,000, and a basis of $635,000.
Question 5: Using the information from question 4, determine the basis of the property contributed in the hands of the corporation in each instance. Assume that the 80% rule is met in all cases.
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