Question

Xena and Xavier form the XX LLC. Xena contributes cash of 20,000, land (basis =40,000; fair market value = 25,000), equipment (basis =0; fair market value = 35,000), and inventory (basis =30,000; fair market value = 40,000). Xavier contributed120,000 of cash. How much is the partnership's basis in the land, equipment, and inventory, and how much is Xena's basis in the partnership interest?

1) 40,000 land,35,000 equipment, 40,000 inventory;135,000 partnership interest.
2) 25,000 land,0 equipment, 30,000 inventory;55,000 partnership interest.
3) 25,000 land,35,000 equipment, 30,000 inventory;105,000 partnership interest.
4) 40,000 land,0 equipment, 30,000 inventory;90,000 partnership interest.

Answer 1

Answer:The partnership's basis in the land, equipment, and inventory can be calculated by taking the fair market value of each asset contributed.

For the land, Xena's basis was $40,000, but the fair market value is $25,000. So the partnership's basis in the land is $25,000.

For the equipment, Xena's basis was $0, but the fair market value is $35,000. So the partnership's basis in the equipment is $35,000.

For the inventory, Xena's basis was $30,000, and the fair market value is $40,000. So the partnership's basis in the inventory remains $30,000.

As for Xena's basis in the partnership interest, it is calculated by adding up the value of her contributions. In this case, Xena contributed $20,000 in cash, $25,000 in land, $35,000 in equipment, and $40,000 in inventory. So Xena's basis in the partnership interest is $20,000 + $25,000 + $35,000 + $40,000 = $120,000.

Based on these calculations, the correct answer is:

3) 25,000 land, 35,000 equipment, 30,000 inventory; 105,000 partnership interest.

I hope this helps clarify the concept for you! If you have any further questions, feel free to ask.

Step-by-step explanation:

Answer 2

The partnership's basis in the land, equipment, and inventory is $40,000, $35,000, and $30,000 respectively. Xena's basis in the partnership interest is $45,000.

Step-by-step explanation:

The partnership's basis in the land is $40,000, the basis in the equipment is $35,000, and the basis in the inventory is $30,000.

Xena's basis in the partnership interest can be calculated by adding all the contributions made by Xena and multiplying them by her ownership percentage. In this case, Xena contributed $20,000 in cash, land with a basis of $40,000, equipment with a basis of $0, and inventory with a basis of $30,000. Her total contribution is $90,000. Since Xena and Xavier formed a partnership, they have an equal ownership percentage. Therefore, Xena's basis in the partnership interest is $45,000 ($90,000 * 50%).