Emma and Laine form the equal EL Partnership Emma contribute

Emma and Laine form the equal EL Partnership. Emma contributes cash of $100,000. Laine contributes property with an adjusted basis of $40,000 and a fair market value of $100,000. a. How much gain, if any, must Emma recognize on the transfer? Must Laine recognize any gain? If so, how much? b. What is Emma\'s basis in her partnership interest? c. What is Laine\'s basis in partnership interest? d. What basis does the partnership take in the property transferred by Laine?

Solution

ANSWER:

1) Neither partner has a loss or gain recognized because under section 721, the partners and the partners contributes property to the partnership.

2) Emma’s cash basis in the partnership interest is $100,000

3) Laine’s basis in her partnership interest is $40,000. Laine will own the partner\'s outside basis in the partnership similar to the partnership basis in the contributed assets also known as substituted basis of $40,000

4) The basis that the partnership take in the property transferred by Laine is $40,000 because of the carryover rule.