Patrick and Brittany each contribute $1,000,000 cash to form Chief R/E Investments, LLC ("Chiefs") on Jan 1, year 1. The partnership uses the cash to purchase three real estate properties: Arrowhead for $1,000,000; Kaufmann for $600,000; and Sporting for $400,000. Assume all three properties are non-depreciable land and the partnership has no debt. On Jan 1, year 3, the partnership plans to admit two new partners (Taylor and Travis), and the parties plan for each partner to hold a 25% interest. At this point, Arrowhead is valued at $2,500,000, Kauffman is valued at $700,000, and Sporting is valued at $800,000. Chiefs makes a section 754 election and will complete a revaluation in accordance with section 704(b) prior to admitting Taylor and Travis. Answer the following questions: (1) Complete an updated tax balance sheet that reflects the revaluation/book-up and Taylor and Travis's contributions for their respective 25% interests. (2) On Jan 1, year 4, Chiefs sells Kauffman for $900,000. How much book and tax gain is allocated to each partner from this sale?
Patrick and Brittany each contribute $1,000,000 cash to form Chief R/E Investments, LLC ("Chiefs") on Jan 1, year 1. The partnership uses the cash to purchase three real estate properties: Arrowhead for $1,000,000; Kaufmann for $600,000; and Sporting for $400,000. Assume all three properties are non-
On Jan 1, year 3, the partnership plans to admit two new partners (Taylor and Travis), and the parties plan for each partner to hold a 25% interest. At this point, Arrowhead is valued at $2,500,000, Kauffman is valued at $700,000, and Sporting is valued at $800,000. Chiefs makes a section 754 election and will complete a revaluation in accordance with section 704(b) prior to admitting Taylor and Travis.
Answer the following questions:
(1) Complete an updated tax
(2) On Jan 1, year 4, Chiefs sells Kauffman for $900,000. How much book and tax gain is allocated to each partner from this sale?
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