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 $3,600 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 $7,740, which is encumbered by a recourse mortgage of $4,860. Lemon has held the land for several years as an investment, and his basis in the land is $1,800. Lemon also contributes $720 in cash. • Lime contributes a building, a § 1231 asset, with a value of $4,680 in which Lime has an adjusted basis of $2.340. The building was purchased several years ago by Lime and is subject to a recourse mortgage $1,080. . 000 Orange contributes zero basis accounts receivable from his business worth $6,300 and assigns his accounts payable of $2,700 to the partnership. $1,080 $0 $1,800 $360
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 $3,600 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 $7,740, which is encumbered by a recourse mortgage of $4,860. Lemon has held the land for several years as an investment, and his basis in the land is $1,800. Lemon also contributes $720 in cash. • Lime contributes a building, a § 1231 asset, with a value of $4,680 in which Lime has an adjusted basis of $2.340. The building was purchased several years ago by Lime and is subject to a recourse mortgage $1,080. . 000 Orange contributes zero basis accounts receivable from his business worth $6,300 and assigns his accounts payable of $2,700 to the partnership. $1,080 $0 $1,800 $360
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 $3,600
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 $7,740, which is encumbered by a
recourse mortgage of $4,860. Lemon has held the land for several years as an investment,
and his basis in the land is $1,800. Lemon also contributes $720 in cash.
• Lime contributes a building, a § 1231 asset, with a value of $4,680 in which Lime has an
adjusted basis of $2.340. The building was purchased several years ago by Lime and is
subject to a recourse mortgage $1,080.
Orange contributes zero basis accounts receivable from his business worth $6,300 and
assigns his accounts payable of $2,700 to the partnership.
$1,080
$0
O $1,800
$360
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