Question

Paul sells one parcel of land (basis of $100,000) for its fair market value of $160,000 to a partnership in which he owns a 60% capital interest. Paul held the land for investment purposes. The partnership is in the real estate development business, and will build residential housing (for sale to customers) on the land (the land is inventory to the partnership). Paul will recognize:

Answer 1

Paul will recognize $60.000 ordinary income.

Step-by-step explanation:

Step 1. Consider the following calculations

The Sale on land = $100000

The Fair Market Value = $160000

The interest rate @60%

Step 2. Solve. = $100.000@60% = $60.000 ordinary income.