Reference no: EM132746522

Question: The equal XYZ Partnership has the following balance sheets: Basis FMV Property A $39,000 $54,000 Property B

$60,000

$42,000

Inventory A

$3,000

$15,000

Inventory B

$15,000

$12,000

$117,000

$123,000

Capital, X

$35,000

$41,000

Capital, Y

$41,000

$41,000

Capital, Z

$41,000

$41,000

$117,000

$123,000

XYZ has a Code Section 754 election in effect, and X sells her interest to W for $41,000 cash. The two Properties are both capital assets. Inventory A was contributed by X at a time when its unrealized appreciation was $6,000. At the time of the transfer, X's share of the partnership's basis in partnership assets is $35,000.

i. How much is the Code Sec. 743(b) adjustment to each asset?

ii. How much income would be allocated to each partner if, one year later, Property A is sold for $60,000?