Question

Jim, one of two equal partners of the JJ Partnership, a general partnership, contributed business property with an adjusted basis to him of $15,000 and a fair market value of $10,000 to the JJ Partnership. Jim’s capital account was credited with $10,000. The property later was sold for $12,000. As a result of this sale, how much gain or loss must Jim report on his personal income tax return? a. $1,000 gain b. $1,500 loss c. $2,000 gain d. $3,000 loss

Can you please help my with my questions? Can someone recognize a loss after a patnership tranfer? the basis it should not be 10000? The information about the equals partners is not important? If they had not sold the property what have happend with that loss? How can Jim recognized that loss? Thank you in advance!

Answer 1

The partnership’s basis in the property is $15,000 (the contributing partner’s basis at the time of contribution).

The sale of the property by the partnership resulted in a $3,000 loss ($12,000 proceeds less $15,000 AB

Precontribution loss must be allocated to the contributing partner. Jim must recognize all of the precontribution loss of $5,000 ($15,000 basis – $10,000FMV contribution)

plus his $2,000 share of postcontribution gain [($10,000 FMV of contribution – $12,000 sales price) ]

THE RIGHT ANSWER SHALL BE option D. $3000 loss.

When a partnership is transferred his account is fully settled. He is no more account to take or give for the transaction happened after his exit. So no loss.

No the $10000 is the fair value but the adjusted basis for the partner at time of transfer of asset is $15000.

In this question it is not important that the partners are of equal share as all loss is being transferred to the contributing partner.

If oropertp was not sold then no loss would have been occured. And nothing would have been adjusted in the capital account of JIM.

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