Owen owns 60 percent of the Big Time partnership. He sells to the partnership a machine for $70,000 that has a $45,000 basis. What would the taxable income be for Owen and what is the partnership's basis in the machine?

Question

Quizplus · Accepted Answer

Owen's gain on the sale of the machine is calculated as:

Sale price - Basis = Gain
$70,000 - $45,000 = $25,000

Since Owen owns 60 percent of the partnership, his taxable income from the sale is:

60% x $25,000 = $15,000

The partnership's basis in the machine is the amount paid for it, which is $70,000.

Owen Owns 60 Percent of the Big Time Partnership