1. When property formerly used by a partner for personal purposes is contributed by the partner to the partnership which converts it to business or investment use, the partnership takes as its basis in the property for computing depreciation
a. the property’s fair market value at date of contribution.
b. the lower of the partner’s adjusted basis in the property or the property’s fair market value at date of contribution.
c. the partner’s adjusted basis in the property.
d. none of the above.
2. On January 1, 2015, Carl, Hank, and Laurie formed a three-person equal partnership with Carl and Hank each contributing $100,000 and Laurie contributing investment property (land) with a basis to her of $60,000 and a fair market value of $100,000. On September 30, 2015, the partnership sold the land for $60,000. The amount of the gain or loss to be allocated to Laurie is:
a. 0.
b. $40,000 loss.
c. $60,000 loss.
d. none of the above.
3. Which, if any, of the following statements is or are false?
I. If property with a built-in loss is contributed to an “investment partnership” that would be treated as an investment company if the partnership instead was a corporation, the loss will be recognized upon contribution.
II. A partnership is entitled to deduct a guaranteed payment to a partner if a cash payment of the same amount to an independent party would have been deductible.
a. I only.
b. II only