Henrietta transfers cash of $75,000 and equipment with a fair market value of $25,000 (basis to her as a sole proprietor, $10,000) in exchange for a 40% profit and loss interest worth $100,000 in a partnership. How much are Henrietta’s realized and recognized gains? What is the amount of Henrietta’s basis in her partnership interest? What is the partnership’s basis in the contributed equipment?
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
Henrietta transfers cash of $75,000 and equipment with a fair market value of $25,000 (basis to her as a sole proprietor, $10,000) in exchange for a 40%
- How much are Henrietta’s realized and recognized gains?
- What is the amount of Henrietta’s basis in her partnership interest?
- What is the partnership’s basis in the contributed equipment?
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