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    Tax consequences of sale and land when forming a partnership

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    Mike and Lisa formed a partnership at the beginning of the year. They were equal partners and they had the same basis. When the partnership was formed, Mike contributed the following items:

    Basis FMV
    Building $150,000 $200,000
    Land $ 60,000 $ 70,000
    Equipment $50,000 $ 40,000
    Total $260,000 $310,000

    In order to raise funds for operation of the business the partnership sold both the land and building in the 5th month of operation.
    The land was sold for $70,000 and the building was sold for $230,000.
    What are the tax consequences of the sale of the land and building on each of the partners?

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    Solution Preview

    As a general rule, no gain or loss is recognized on the contribution of money or property to a partnership. When a partner contributes appreciated or depreciated property to a partnership, the property has an inherent built-in gain or built-in loss that ...

    Solution Summary

    The tax consequences of sale and land when forming a partnership is determined.