Aba Has Just Become a Partner of the Thursday Partnership

Aba has just become a partner of the Thursday Partnership. She has a pick up truck which previously used in her own gardening business, and which would be useful to the partnership, and as her initial capital contribution, she transfers the truck to the partnership. The truck cost her $45,000, has a UCC of $28,000 and a fair market value of $35,000. The other partner can only contribute cash of $30,000, so the partnership pays Aba $5,000 in cash to keep the initial contributions equal. What are the tax consequences of this transaction?

A) Aba will have disposed of the truck for $35,000 resulting in recapture. • The adjusted cost base of her partnership interest will be $35,000.
• The partnership will have acquired the truck for $35,000.
B) Aba will have disposed of the truck for $30,000 resulting in recapture. • The adjusted cost base of her partnership interest will be $30,000.
• The partnership will have acquired the truck for $30,000.
C) Aba will have disposed of the truck for $35,000 resulting in recapture. • The adjusted cost base of her partnership interest will be $30,000.
• The partnership will have acquired the truck for $35,000.
D) Aba will have disposed of the truck for $30,000 resulting in recapture. • The adjusted cost base of her partnership interest will be $35,000.
• The partnership will have acquired the truck for $30,000.