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Sue and Andrew form SA general partnership
Sue and Andrew form SA general partnership. Each person receives an equal interest in the newly created partnership. Sue contributes $18,000 of cash and land with a FMV of $63,000. Her basis in the land is $28,000. Andrew contributes equipment with a FMV of $20,000 and a building with a FMV of $41,000. His basis in the equipment is $16,000, and his basis in the building is $28,000. How much gain must the SA general partnership recognize on the transfer of these assets from Sue and Andrew?
Multiple Choice
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$0.
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$4,000.
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$48,000.
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$52,000.
Expert Solution
The correct answer is option a - $0
Partnerships don't recognize any gain on the receipt of contributed appreciated property. The built-in gain or built-in loss will be reported at the time of disposition of the asset. To ensure this result, the partnership's basis in the acquired property is a carryover basis.
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