Question

10.10 Several years ago, Ashley, Beatrice and Charlie each contributed $120,000 to a newly formed partnership. Ashley contributed cash, Beatrice contributed investment land with a tax basis of $30,000 and Charlie contributed investment stock with a tax basis of $40,000. The partnership uses the traditional method for applying section 704(c). The partnership has not yet found an appropriate investment for its cash, and its balance sheet today, expanded to show asset values, looks like this: Assets | Liabilities Tax | Book | FMV | Tax | Book Cash | $120,000 | $120,000 | $120,000 | [None] | $ 0 | $ 0 Land | 30,000 | 120,000 | 180,000 | Stock | 40,000 | 120,000 | 90,000 | Capital Ashley | 120,000 | 120,000 Beatrice | 30,000 | 120,000 Charlie | 40,000 | 120,000 Total Assets | $190,000 | $360,000 | $390,000 | Total Liabilities and Capital | $190,000 | $360,000 Daniel buys Charlie's partnership interest for $130,000 cash and in connection with this acquisition the partnership makes an election under section 754. What amount of Daniel's special basis adjustment is allocated to each of the partnership's assets? a) Land, $20,000; stock, $50,000 b) Land, $20,000; stock, $50,000; section 197 intangible, $20,000 c) Land, $30,000; stock, $60,000 d) Land, $23,222; stock, $46,667

          10.10 Several years ago, Ashley, Beatrice and Charlie each contributed $120,000 to a newly formed partnership. Ashley contributed cash, Beatrice contributed investment land with a tax basis of $30,000 and Charlie contributed investment stock with a tax basis of $40,000. The partnership uses the traditional method for applying section 704(c). The partnership has not yet found an appropriate investment for its cash, and its balance sheet today, expanded to show asset values, looks like this:
Assets | Liabilities
Tax | Book | FMV | Tax | Book
Cash | $120,000 | $120,000 | $120,000 | [None] | $ 0 | $ 0
Land | 30,000 | 120,000 | 180,000 |
Stock | 40,000 | 120,000 | 90,000 |
Capital
Ashley | 120,000 | 120,000
Beatrice | 30,000 | 120,000
Charlie | 40,000 | 120,000
Total Assets | $190,000 | $360,000 | $390,000 | Total Liabilities and Capital | $190,000 | $360,000
Daniel buys Charlie's partnership interest for $130,000 cash and in connection with this acquisition the partnership makes an election under section 754. What amount of Daniel's special basis adjustment is allocated to each of the partnership's assets?
a) Land, $20,000; stock, $50,000
b) Land, $20,000; stock, $50,000; section 197 intangible, $20,000
c) Land, $30,000; stock, $60,000
d) Land, $23,222; stock, $46,667

10.10 Several years ago, Ashley, Beatrice and Charlie each contributed 120,000 to a newly formed partnership. Ashley contributed cash, Beatrice contributed investment land with a tax basis of30,000 and Charlie contributed investment stock with a tax basis of 40,000. The partnership uses the traditional method for applying section 704(c). The partnership has not yet found an appropriate investment for its cash, and its balance sheet today, expanded to show asset values, looks like this:
Assets | Liabilities
Tax | Book | FMV | Tax | Book
Cash |120,000 | 120,000 |120,000 | [None] | 0 | 0
Land | 30,000 | 120,000 | 180,000 |
Stock | 40,000 | 120,000 | 90,000 |
Capital
Ashley | 120,000 | 120,000
Beatrice | 30,000 | 120,000
Charlie | 40,000 | 120,000
Total Assets | 190,000 |360,000 | 390,000 | Total Liabilities and Capital |190,000 | 360,000
Daniel buys Charlie's partnership interest for130,000 cash and in connection with this acquisition the partnership makes an election under section 754. What amount of Daniel's special basis adjustment is allocated to each of the partnership's assets?
a) Land, 20,000; stock,50,000
b) Land, 20,000; stock,50,000; section 197 intangible, 20,000
c) Land,30,000; stock, 60,000
d) Land,23,222; stock, 46,667

Added by Matthew S.

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