Question

Sam, Sue, and Shelley formed a partnership. Sam received a 50 percent interest in the partnership in exchange for land with an adjusted basis to him of $30,000 and a fair market value of $50,000. Sue received a 25 percent interest in the partnership in exchange for $25,000 of cash. Shelley received a 25 percent interest in the partnership in exchange for $25,000 of cash. Three years after the date of contribution, the land contributed by Sam was sold by the partnership to an unrelated third party for $90,000.

Required:
1. How much gain was required to be allocated to Sam as a result of the sale by the partnership?
a. $20,000.
b. $30,000.
c. $40,000.
d. $60,000.

Answer 1

b. $30,000.

Step-by-step explanation:

Total Gain $90,000

Less adjusted basis $30,000

Balance $60,000

Share in the partnership (50%×$60,000) $30,000

Therefore the gain that was required to be allocated to Sam as a result of the sale by the partnership will be $30,000