Barndon and Celia are forming the BC Partnership. Barndon contributes
$20000 cash and Celia contributes non-depreciable property with an
adjusted basis of $18000 and a fair market value of $30000. The
property is subject to a $10000 liability which is also transferred
into the partnership and is shared equally except for any
pre-contribution gain which must be allocated according to the
statutory rules required for built-in gain allocations.

A.  What is Celia's adjusted tax basis for her partnership interest
immediately after the partnership is formed?

B.  What is the partnership's adjusted basis for the property
contributed by Celia?

C.  If the partnership sells the property contributed by Celia for
$35000, how is thge tax gain allocated between the partners?

---

Clarification of Question by alpa_sanjay-ga on 23 Apr 2003 08:08 PDT

we are taking about USA

Hello again:

So Barndon contributes $20,000 of cash. Celia contributes property
with a fair market value of $30,000, an adjusted basis of $18,000,
subject to a liability of $10,000. Barndon's initial basis in his
partnership interest is $25,000 ($20,000 cash contributed plus
Barndon's share (50%) of the partnership's $10,000 liability).
Celia's's initial basis in her partnership interest is $13,000
($18,000 adjusted basis in contributed property minus $5,000 of
liability allocated to Barndon).

The partnership's adjusted basis for the property is the same 18,000. 
So if it sells it for 35,000 it has 17,000 of gain.

Celia's capital account is 30,000 and she is a 60% partner.

Under Code §704(c)(1), a partnership must allocate items of income,
gain, loss, or deduction with respect to contributed property among
its partners so as to allocate the burdens and benefits of built-in
gain or loss to the contributing partner.

So the first 12,000 of gain is allocated to Celia, and the remaining
5,000 of gain is allocated 60% to Celia and 40% to Barndon.  So Celia
recognizes 15,000 total gain and Barndon the remaining 2,000.

Search terms used:
704(c) partnership contributed property

Cheers!
Richard-ga

Which country are we talking about ?

Interesting questions, alpa_sanjay-ga. 
Please take a look at the Google Answers pricing guidelines to help
you increase the probability of getting an answer.
 
https://answers.google.com/answers/pricing.html