Answer:
The amount of gain that was reportable in Gary's 201 return on the contribution of property to the partnership is:
a. $0
Explanation:
We need to determine the amount of gain the Gray will receive from the transaction.
Use the Fair market value to determine the value of his contribution
Value of Gray's contribution=$30,000
Total Kag and Gray contribution=$150,000
Determine the value of Gray's property interest as shown;
V=T×I
where;
V=Gray's share of Capital interest
T=total partnership capital
I=interest
This can also be written as;
Value of Capital interest=total capital×interest
where;
V=unknown
T=$150,000
I=40%=40/100=0.4
replacing;
V=0.4×150,000=$60,000
Gray's share of capital interest=$60,000
Gray's share of capital interest($60,000)>Fair market value ($30,000)
It has to be noted that the non-recognition rule applies in this case even if the partnership capital interest exceeds the fair market value of the contributed property.
So the amount of gain that was reportable in Gary's 201 return on the contribution of property to the partnership is $0
