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What are the tax consequences to the partners

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Reference no: EM132924292

Question - On May? 31, six brothers decided to form the Garrison Brothers Partnership to publish and print? children's stories. The contributions of the brothers and their partnership interests are listed below. They share the economic risk of loss from liabilities according to their partnership interests.

Bill contributes accounts receivable from his? proprietorship, which uses the cash method of accounting. Chad uses the office equipment in a small business he owns. When he joins the?partnership, he sells the remaining business assets to an outsider. He has claimed? $8,000 of MACRS depreciation on the office equipment. The partnership assumes a $180,000 mortgage on the building Ewan contributes. Ewan claimed $110,000 of? straight-line MACRS depreciation on the commercial property. Fraser?, an?attorney, drew up all the partnership agreements and filed the necessary paperwork. He receives a full 5% capital and profits interest for his services.

a. How much? gain, loss, or income must each partner recognize as a result of the? formation?

b. How much? gain, loss, or income must the partnership recognize as a result of the? formation?

c. What is each? partner's basis in his partnership? interest?

d. What is the? partnership's basis in its? assets?

e. What is the? partnership's initial book value of each? asset?

f. What effects do the depreciation recapture provisions have on the property? contributions?

g. How would your answer to Part a change if Fraser received only a profits? interest?

h. What are the tax consequences to the partners and the partnership when the partnership sells for $264,000 the land contributed by Dexter?? Prior to the? sale, the partnership held the land as an investment for two years.

Reference no: EM132924292

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