Sue and Andrew form SA general partnership. Each person receives an equal interest in the newly created partnership. Sue contributes $10,000 of cash and land with a FMV of$55,000. Her basis in the land is $20,000. Andrew contributes equipment with a FMV of$12,000 and a building with a FMV of $33,000. His basis in the equipment is $8,000, and his basis in the building is $20,000. How much gain must the SA general partnership recognize on the transfer of these assets from Sue and Andrew?
A) $48,000.
B) $4,000.
C) $0.
D) $52,000.

Question

Quizplus · Accepted Answer

No gain or loss is recognized on contributions to a partnership, as long as the contributed property's fair market value is equal to or greater than the partner's adjusted basis. In this case, both Sue and Andrew's contributions have a FMV greater than their adjusted basis, so no gain or loss is recognized. Therefore, the SA general partnership must recognize $0 in gain on the transfer of these assets from Sue and Andrew.

Sue and Andrew Form SA General Partnership