Sean, Penelope, and Juan formed the SPJ partnership by each contributing assets with a basis and fair market value of $200,000. In the following year, Penelope sold her one-third interest to Pedro for $225,000. At the time of the sale, the SPJ partnership had the following balance sheet:
$\quad $$\quad $$\quad $$ \underline{\text {Basis}}$$\quad $$\quad $$ \underline{\text { FlMV }} $
$\begin{array}{lll}
\text { Cash } & \$ 200,000 & \$ 200,000 \
\text { Land } &\$400,000&\$475,000 \
&\$600,000&\$675,000
\end{array}$ Shortly after Pedro became a partner, SPJ sold the land for $475,000. What are the tax consequences of the sale to Pedro and the partnership (1) assuming there is no Section 754 election in place, and (2) assuming the partnership has a valid Section 754 election?

Question

Sean, Penelope, and Juan formed the SPJ partnership by each contributing assets with a basis and fair market value of $200,000. In the following year, Penelope sold her one-third interest to Pedro for $225,000. At the time of the sale, the SPJ partnership had the following balance sheet:
 $\quad $$\quad $$\quad $$ \underline{\text {Basis}}$$\quad $$\quad $$ \underline{\text { FlMV }} $
$\begin{array}{lll}
\text { Cash } & \$ 200,000 & \$ 200,000 \
\text { Land } &\$400,000&\$475,000 \
&\$600,000&\$675,000
\end{array}$  Shortly after Pedro became a partner, SPJ sold the land for $475,000. What are the tax consequences of the sale to Pedro and the partnership (1) assuming there is no Section 754 election in place, and (2) assuming the partnership has a valid Section 754 election?

Quizplus · Accepted Answer

The Answer of Sean, Penelope, and Juan formed the SPJ partnership by each contributing assets with a basis and fair market value of $200,000. In the following year, Penelope sold her one-third interest to Pedro for $225,000. At the time of the sale, the SPJ partnership had the following balance sheet:
 $\quad $$\quad $$\quad $$ \underline{\text {Basis}}$$\quad $$\quad $$ \underline{\text { FlMV }} $
$\begin{array}{lll}
\text { Cash } & \$ 200,000 & \$ 200,000 \
\text { Land } &\$400,000&\$475,000 \
&\$600,000&\$675,000
\end{array}$  Shortly after Pedro became a partner, SPJ sold the land for $475,000. What are the tax consequences of the sale to Pedro and the partnership (1) assuming there is no Section 754 election in place, and (2) assuming the partnership has a valid Section 754 election?

Sean, Penelope, and Juan Formed the SPJ Partnership by Each \quad

Sean, Penelope, and Juan Formed the SPJ Partnership by Each $\quad$