Mrs.Brinkley transferred business property (FMV $340,200; adjusted tax basis $111,700)to M&W Inc.in exchange for a 36% interest in M&W Partnership.Determine Mrs.Brinkley's realized and recognized gain on the exchange and the tax basis in her partnership interest.

Question

Quizplus · Accepted Answer

Mrs. Brinkley's realized gain is the difference between the FMV and the adjusted tax basis ($340,200 - $111,700 = $228,500). However, under IRC Section 721, no gain is recognized when property is exchanged for a partnership interest. Her tax basis in the partnership interest is the same as her adjusted tax basis in the property transferred, $111,700.

MrsBrinkley Transferred Business Property (FMV $340,200; Adjusted Tax Basis $111,700)to