Partnership Calculation of Basis, Gain/Loss21The MP Partnership was formed to acquire land and subdivide
it as residential housing lots. On July 1, 2007, Miranda contributed land
valued at $300,000 to the partnership, in exchange for a 50% interest in MP.
She had purchased the land in 1999 for $140,000 and held it for investment
purposes (capital asset). The partnership holds the land as inventory. On the
same date, Paul contributed land valued at $300,000 that he had purchased in
2000 for $350,000. He also became a 50% owner. Paul is a real estate developer,
but this land was held personally for investment purposes. The partnership
holds this land as inventory. In 2008, the partnership sells the land
contributed by Miranda for $340,000. In 2009, the partnership sells one-half of
the subdivided real estate contributed by Paul for $140,000. The other half is
finally sold in 2014 for $160,000a) What is each partner’s initial basis in his or her
partnership?b) What is the amount of gain or loss recognized on the sale
of the land contributed by Miranda? What is the character of this gain or loss?
c) What is the amount of gain or loss recognized in 2009 and
2014 on the sale of the land contributed by Paul? What is the character of this
gain or loss?
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