Sue and Andrew form SA general partnership. Each person receives an equal interest in the newly created partnership. Sue contributes $10,000 of cash and land with a FMV of $55,000. Her basis in the land is $20,000. Andrew contributes equipment with a FMV of $12,000 and a building with a FMV of $33,000. His basis in the equipment is $8,000, and his basis in the building is $20,000. How much gain must the SA general partnership recognize on the transfer of these assets from Sue and Andrew?
A) $0.
B) $4,000.
C) $48,000.
D) $52,000.

Question

Quizplus · Accepted Answer

Partnerships don't recognize any gain on the receipt of contributed appreciated property. The built-in gain or built-in loss will be reported at the time of disposition of the asset. To ensure this result, the partnership's basis in the acquired property is a carryover basis.

Sue and Andrew Form SA General Partnership