Hannah, Rose, and Rachael form an equal general partnership. Hannah and Rose each contribute $40,000 cash. Rachael contributes land with a basis of $48,000 and a fair market value of $100,000, subject to a nonrecourse liability of $60,000. Under section 752, assume that the liability will be allocated to the partners as follows: Hannah ($16,000); Rose ($16,000); and Rachael ($28,000). Prepare the partnership’s books following formation. *hint* - a partner’s tax capital account can be negative AssetsBookTaxLiabilitiesBookTax CapitalBookTax Determine each partner’s outside basis in the partnership.

1) First, let's calculate the total contributions: Hannah: $40,000 cash Rose: $40,000 cash…

Answered: Hannah, Rose, and Rachael form an equal…

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter21: Partnerships

Section: Chapter Questions

Problem 28P

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Hannah, Rose, and Rachael form an equal general partnership. Hannah and Rose each contribute $40,000 cash. Rachael contributes land with a basis of $48,000 and a fair market value of $100,000, subject to a nonrecourse liability of $60,000.

Under section 752, assume that the liability will be allocated to the partners as follows: Hannah ($16,000); Rose ($16,000); and Rachael ($28,000). Prepare the partnership’s books following formation.

*hint* - a partner’s tax capital account can be negative

Assets	Book	Tax	Liabilities	Book	Tax

			Capital	Book	Tax

Determine each partner’s outside basis in the partnership.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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