Lemon, Lime, and Orange, three cash method, calendar year individuals, form Starburst General Partnership to create fruit candies. Before forming this partnership, they each had their own sole proprietorship. The partners contribute the following property (in each case worth $100 net of liabilities) in exchange for equal 1/3 interests in the partnership's capital, profits and losses (see the table below of property contributed by each partner). The partnership assumes all liabilities encumbering the contributed assets. Assume that the partners are responsible for an equal share of the partnership's liabilities. What is the most that any specific partner recognizes on these transactions? Lemon contributes land with a fair market value of $215, which is encumbered by a recourse mortgage of $135. Lemon has held the land for several years as an investment, and his basis in the land is $50. Lemon also contributes $20 in cash. ο ο ο ο Lime contributes a building, a § 1231 asset, with a value of $130 in which Lime has an adjusted basis of $65. The building was purchased several years ago by Lime and is subject to a recourse mortgage $30. Orange contributes zero basis accounts receivable from his business worth $175 and assigns his accounts payable of $75 to the partnership. O $30 $50 $10 O $0
Lemon, Lime, and Orange, three cash method, calendar year individuals, form Starburst General Partnership to create fruit candies. Before forming this partnership, they each had their own sole proprietorship. The partners contribute the following property (in each case worth $100 net of liabilities) in exchange for equal 1/3 interests in the partnership's capital, profits and losses (see the table below of property contributed by each partner). The partnership assumes all liabilities encumbering the contributed assets. Assume that the partners are responsible for an equal share of the partnership's liabilities. What is the most that any specific partner recognizes on these transactions? Lemon contributes land with a fair market value of $215, which is encumbered by a recourse mortgage of $135. Lemon has held the land for several years as an investment, and his basis in the land is $50. Lemon also contributes $20 in cash. ο ο ο ο Lime contributes a building, a § 1231 asset, with a value of $130 in which Lime has an adjusted basis of $65. The building was purchased several years ago by Lime and is subject to a recourse mortgage $30. Orange contributes zero basis accounts receivable from his business worth $175 and assigns his accounts payable of $75 to the partnership. O $30 $50 $10 O $0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Lemon, Lime, and Orange, three cash method, calendar year individuals, form Starburst General Partnership to create fruit candies. Before forming this partnership,
they each had their own sole proprietorship. The partners contribute the following property (in each case worth $100 net of liabilities) in exchange for equal 1/3
interests in the partnership's capital, profits and losses (see the table below of property contributed by each partner). The partnership assumes all liabilities
encumbering the contributed assets. Assume that the partners are responsible for an equal share of the partnership's liabilities. What is the most that any specific
partner recognizes on these transactions?
Lemon contributes land with a fair market value of $215, which is encumbered by a recourse mortgage of $135. Lemon has held the land for several years as an
investment, and his basis in the land is $50. Lemon also contributes $20 in cash.
ο ο ο ο
Lime contributes a building, a § 1231 asset, with a value of $130 in which Lime has an adjusted basis of $65. The building was purchased several years ago by
Lime and is subject to a recourse mortgage $30.
Orange contributes zero basis accounts receivable from his business worth $175 and assigns his accounts payable of $75 to the partnership.
O $30
$50
$10
O $0
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