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

Question

Quizplus · Accepted Answer

Mark's basis in the land contributed to the partnership is $40,000. When the land is sold for $76,000, Mark's share of the gain is calculated as follows:

Mark's share of partnership
gain = Mark's % interest * Partnership gain
Mark's share of partnership gain = 25% * ($76,000 - $40,000) = 25% * $36,000 = $9,000

Since Mark's basis in the land was $40,000 and his share of the gain is $9,000, he will recognize a taxable gain of $24,000 ($9,000 gain - $40,000 basis). Therefore, the correct answer is C.

Mark and Addison Formed a Partnership