Ezinne transfers land with an adjusted basis of $50,000 and a FMV of $95,000 to a new business in exchange for a 50% ownership interest.The land is subject to a $60,000 mortgage which the business will assume.The business has no other liabilities outstanding.Indicate the amount of gain recognized by Ezinne due to this exchange if the building is (1) a corporation and (2) a partnership.Assume Sec.351 is satisfied in the case of the corporation and Sec.721 is satisfied in the case of the partnership.

Question

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B) In the corporate situation, the shareholder recognizes gain to the extent that total liabilities exceed the basis of property transferred ($60,000 mortgage - $50,000 adjusted basis = $10,000 gain recognized). In the partnership form, the transferor partner recognizes gain only if the personal liability relief exceeds the partner's basis in the partnership, after taking into account the partner's basis adjustment for her share of partnership liabilities ($50,000 property adjusted basis + $30,000 share of mortgage - $60,000 personal liability relief = $20,000 partnership basis). Since her basis in the partnership is not negative, no gain is recognized.

Ezinne Transfers Land with an Adjusted Basis of $50,000 and a FMV