Question

Tina and Betty formed a partnership. Tina received a 40 percent interest in the partnership in exchange for land with an adjusted basis to her of $60,000 and a fair market value of $80,000. Betty received a 60 percent interest in the partnership in exchange for $120,000 of cash. Three years after the date of contribution, the land contributed by Tina was sold by the partnership to an unrelated third party for $90,000. How much gain was required to be allocated to Tina as a result of the sale by the partnership?a. $4,000
b. $12,000
c. $24,000
d. $30,000

Answer 1

Answer:

c. $24,000

Explanation:

The computation of sale by partnership is shown below:-

The pre-contribution gain allocated to Tina = Fair market value - Adjusted basis

= $80,000 - $60,000

= $20,000

Gain on sales = Partnership to an unrelated third party - Fair market value

= $90,000 - $80,000

= $10,000

Tina partnership interest is 40 % of $10,000

= $4,000

Sale by partnership = pre-contribution gain + Tina partnership

= $20,000 + $4,000

= $24,000

Therefore for computing the sale by partnership we simply applied the above formula.