Question

In 2020 Ryce contributes non depreciable property with an adjusted basis of $101,600 and a fair market value of $152,400 to the Montgomery Partnership in exchange for a one-half interest in profits and capital. In the next tax year, when the property's fair market value is $162,560, the partnership distributes the property to Jarvis, the other one-half partner. Jarvis's basis in the partnership interest was $162,560 immediately before the distribution. Which partner must recognize the built-in gain, what is the amount recognized, and what is the effect on that partner's basis in the partnership interest

Answer 1

A. Ryce

B.$50,800

C. Increase

Step-by-step explanation:

Based on the information given the partner that must recognize the built­in gain is RYCE

B. Calculation to determine the amount recognized

Using this formula

Amount recognized=Fair market value-Adjusted basis

Let plug in the formula

Amount recognized=$152,400-$101,600

Amount recognized=$50,800

Therefore the amount recognized is $50,800

C. Based on the information given the effect on that partner's basis in the partnership interest is that the basis amount in the partnership interest would be INCREASED by the amount of gain that was recognized or Realized.