Lee, Brad, and Rick form the LBR Partnership on January 1 of the current year. In return for a 25% interest, Lee transfers property (basis of $15,000, fair market value of $17,500) subject to a nonrecourse liability of $10,000. The liability is assumed by the partnership. Brad transfers property (basis of $16,000, fair market value of $7,500) for a 25% interest, and Rick transfers cash of $15,000 for the remaining 50% interest. How much gain must Lee recognize on the transfer? The formation of a partnership is not a taxable event, so there is not a recognized gain or loss at the time of formation, but instead takes carryover basis in the assets it receives. Recognized gain is $0.0 What is Lee’s basis in his interest in the partnership? Lee’s basis in the partnership is equal to the basis – nonrecourse amount/interest portion * number of partners = $15,000-10,000*25%=$15,000-$7,500=$7,500
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Lee, Brad, and Rick form the LBR
How much gain must Lee recognize on the transfer?
The formation of a partnership is not a taxable event, so there is not a recognized gain or loss at the time of formation, but instead takes carryover basis in the assets it receives. Recognized gain is $0.0
What is Lee’s basis in his interest in the partnership?
Lee’s basis in the partnership is equal to the basis – nonrecourse amount/interest portion * number of partners = $15,000-10,000*25%=$15,000-$7,500=$7,500
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