Mark and Addison formed a partnership.Mark received a 25% interest in partnership capital and profits in exchange for land with a basis of $40,000 and a fair market value of $60,000.Addison received a 75% interest in partnership capital and profits in exchange for $180,000 of cash.Three years after the contribution date, the land contributed by Mark is sold by the partnership to a third party for $76,000.How much taxable gain will Mark recognize from the sale?
A)$0.
B)$9,000.
C)$24,000.
D)$36,000.
E)None of the above.

Question

Quizplus · Accepted Answer

To calculate the taxable gain that Mark will recognize, we need to determine the adjusted basis of the land at the time of sale. Mark's initial basis in the land was $40,000, but we need to account for any depreciation that has been claimed since the land was contributed. Since we don't have any information on depreciation, we will assume it was not applicable.

The adjusted basis of the land is therefore $40,000. When the land is sold for $76,000, the partnership realizes a gain of $36,000 ($76,000 sales price – $40,000 adjusted basis). Since Mark owns 25% of the partnership, he will recognize 25% of the gain, or $9,000.

Therefore, the correct answer is C) $24,000.

Mark and Addison Formed a Partnership