At the beginning of the current year, Able and Baker formed the AB Partnership by transferring cash and property to the partnership in exchange for a partnership interest, with each having a 50% interest Specifically, Able transferred property having a $50,000 FMV, $30,000 adjusted basis, and subject to a $10,000 liability, which the partnership assumed. Baker contributed $40,000 cash to the partnership. The partnership also borrowed $28,000 from the bank to use in its operations. All liabilities are recourse for which the partner have an equal economic risk of loss. During the current year, the partnership earned $24,000 of net ordinary income and reinvested this amount in new property. Read the requirements. Requirement a. What is the partnership's and each partner's gain or loss recognized on the formation of the partnership? (Complete all input fields. Enter a loss with a minus sign or parentheses. If no gain or loss is recognized by a partner or the partnership, enter a0.) Able Baker Partnership Requirement b. What is each partner's basis in his or her partnership interest at the end of the current year? Basis in Partnership Interest Able Baker Amount of Gain (Loss) 0 $ $ 0 0 51.000 71,000 Requirement c. For the partnership, prepare a tax and book balance sheet at the end of the current year. Begin by preparing the tax balance sheet. Cash Contributed property New property Total assets Liabilities Able, Capital Baker, Capital Total liabilities and capital accounts $ $ $ Tax 68,000 30,000 24,000 122,000 38,000 32,000 52,000 $ 122,000 Cash Contributed property Net pptry Tutela Liabilities Able, Capital Baker, Capital Total liabilities and capital accounts $ $ $ Able Beker Corporation Book 68,000 50,000 24.002 142.003 38.000 52,000 62,000 142,003 Requirement d. Assume instead that Able and Baker formed a corporation rather than a parnership. What is the corporation's and each shareholder's gain or loss recognized on the formation of the corporation? What is each shareholder's basis in his or har stock at the end of the current year? Compute each shareholders and the corporation's gain or loss. (Complete all input falds. Enter a loss with a minus sign or parentheses. I no gain or loss is recognized by a partner or the corporation, enter a 0.) Aunt of Ga (Loss)
At the beginning of the current year, Able and Baker formed the AB Partnership by transferring cash and property to the partnership in exchange for a partnership interest, with each having a 50% interest Specifically, Able transferred property having a $50,000 FMV, $30,000 adjusted basis, and subject to a $10,000 liability, which the partnership assumed. Baker contributed $40,000 cash to the partnership. The partnership also borrowed $28,000 from the bank to use in its operations. All liabilities are recourse for which the partner have an equal economic risk of loss. During the current year, the partnership earned $24,000 of net ordinary income and reinvested this amount in new property. Read the requirements. Requirement a. What is the partnership's and each partner's gain or loss recognized on the formation of the partnership? (Complete all input fields. Enter a loss with a minus sign or parentheses. If no gain or loss is recognized by a partner or the partnership, enter a0.) Able Baker Partnership Requirement b. What is each partner's basis in his or her partnership interest at the end of the current year? Basis in Partnership Interest Able Baker Amount of Gain (Loss) 0 $ $ 0 0 51.000 71,000 Requirement c. For the partnership, prepare a tax and book balance sheet at the end of the current year. Begin by preparing the tax balance sheet. Cash Contributed property New property Total assets Liabilities Able, Capital Baker, Capital Total liabilities and capital accounts $ $ $ Tax 68,000 30,000 24,000 122,000 38,000 32,000 52,000 $ 122,000 Cash Contributed property Net pptry Tutela Liabilities Able, Capital Baker, Capital Total liabilities and capital accounts $ $ $ Able Beker Corporation Book 68,000 50,000 24.002 142.003 38.000 52,000 62,000 142,003 Requirement d. Assume instead that Able and Baker formed a corporation rather than a parnership. What is the corporation's and each shareholder's gain or loss recognized on the formation of the corporation? What is each shareholder's basis in his or har stock at the end of the current year? Compute each shareholders and the corporation's gain or loss. (Complete all input falds. Enter a loss with a minus sign or parentheses. I no gain or loss is recognized by a partner or the corporation, enter a 0.) Aunt of Ga (Loss)
Chapter21: Partnerships
Section: Chapter Questions
Problem 22CE
Related questions
Question
Transcribed Image Text:At the beginning of the current year, Able and Baker formed the AB Partnership by transferring cash and property to the partnership in exchange for a partnership interest, with each having a 50% interest. Specifically, Able transferred property having a $50,000 FMV,
$30,000 adjusted basis, and subject to a $10,000 liability, which the partnership assumed. Baker contributed $40,000 cash to the partnership. The partnership also borrowed $28,000 from the bank to use in its operations. All liabilities are recourse for which the partner
have an equal economic risk of loss. During the current year, the partnership earned $24,000 of net ordinary income and reinvested this amount in new property.
Read the requirements.
Requirement a. What is the partnership's and each partner's gain or loss recognized on the formation of the partnership? (Complete all input fields. Enter a loss with a minus sign or parentheses. If no gain or loss is recognized by a partner or the partnership, enter
a 0.)
Able
Baker
Able
Baker
Amount of Gain
(Loss)
$
$
$
$
Partnership
Requirement b. What is each partner's basis in his or her partnership interest at the end of the current year?
Basis in Partnership
Interest
0
0
51,000
71,000
Requirement c. For the partnership, prepare a tax and book balance sheet at the end of the current year.
Begin by preparing the tax balance sheet.
Cash
Contributed property
New property
Total assets
Liabilities
Able, Capital
Baker, Capital
Total liabilities and capital accounts
$
68,000
30,000
24,000
122,000
38,000
32,000
52,000
$ 122,000
$
Tax
$
$
Able
Baker
Corporation
Cash
Contributed property
Net propertry
Tutal assets
Liabilities
Able, Capital
Baker, Capital
Total liabilities and capital accounts
Requirement d. Assume instead that Able and Baker formed a corporation rather than a partnership. What is the corporation's and each shareholder's gain or loss recognized on the formation of the corporation? What is each shareholder's basis in his or her stock at
the end of the current year?
$
Book
$
68,000
50,000
24,000
142.000
38,000
52,000
52,000
142,000
Compute each shareholders' and the corporation's gain or loss. (Complete all input fields. Enter a loss with a minus sign or parentheses. If no gain or loss is recognized by a partner or the corporation, enter a 0.)
Amount of Gair
(Loss)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you