Answer:
A partnership assumes the same depreciation schedule of the contributing party. If this were not so, individuals could accelerate depreciation rates and bypass taxes.
Explanation:
Here, transfer included money; therefore L will recognize $15,000 as gain on property. J recognizes the $150.000 gain on equipment because it was used in a sole proprietorship. The partnership will not recognize any gain loss.
In the formation of a partnership there is no gain to be recognized.
Both parties will take a basis of the property after deducting any realized gain. L takes a basis of the cash and property. which is $155,000. While J takes a basis of the property after deducting realized gain, therefore j’s bases is $20.000.
The company will carry the basis at the same rate the partners have in the property. which is $175,000.
The inside basis is the basis the partnership carries assets at. This is the donated value of
property given at formation plus any additions throughout the company’s life,
The outside basis is the basis the partners carry the property at. This basis is changed by the
partnership’s actions, through improvements, distributions, and contributions.
