Allen contributed land, which was being held for sale to Allen's customers, to a partnership in exchange for a 20% interest. The partnership uses the land in its business for three years and then sells the property. When the property was contributed, it had a basis in Allen's hands of $500,000 and an FMV of $600,000. The partnership sells the land for $700,000. The gain reported by the partnership is
A)$100,000 of ordinary income and $100,000 of Sec. 1231 gain.
B)$100,000 of Sec. 1231 gain and $100,000 of capital gain.
C)$200,000 of ordinary income.
D)$200,000 of Sec. 1231 gain.

Question

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The Answer of Allen contributed land, which was being held for sale to Allen's customers, to a partnership in exchange for a 20% interest. The partnership uses the land in its business for three years and then sells the property. When the property was contributed, it had a basis in Allen's hands of $500,000 and an FMV of $600,000. The partnership sells the land for $700,000. The gain reported by the partnership is
A)$100,000 of ordinary income and $100,000 of Sec. 1231 gain.
B)$100,000 of Sec. 1231 gain and $100,000 of capital gain.
C)$200,000 of ordinary income.
D)$200,000 of Sec. 1231 gain.

Allen Contributed Land, Which Was Being Held for Sale to Allen's