Question

ndividual A ("A"), Individual B ("B"), both calendar year taxpayers, and Corporation C ("C") with a fiscal year end June 30, form Partnership P ("P") on January 1 of Year 1. P manufactured widgets and is not a passive activity.   A contributes $300,000 cash in exchange for a 30% ownership interest (profits and capital), B contributes property with a fair market value ("FMV") of $400,000 and adjusted basis of $110,000, but subject to a non-recourse mortgage of $100,000 (which is not qualified non-recourse financing) in exchange for a 30% ownership interest (profits and capital) and C contributed a property FMV $400,000 adjusted basis $500,000 in exchange for a 40% ownership interest. From January 1, Year 1 through December 31, Year 1 (12 months) P lost $10,000 a month from operations. From January 1 Year 2 through December 31 Year 2 P earned $15,000 per month from operations at which point it shuttered operations and earned $0 thereafter.         a. What income, gain or loss, of any does B recognize upon formation of P?         b. What income does B report on B's income tax return for                         Year 1                         Year 2                         Year 3        c. What income does C report on C's income tax return for                       Year 1                       Year 2                      Year 3

The company's net operating income for the month is $102,000.

Q:) Assuming a constant sales mix, what is Dalia Corporation's companywide break-even sales? (Do not round the intermediate calculations. Round the final answer to the nearest dollars.)

Answer 1

Solution :

As per the given date ,

Individual A("A) , individual B("B") , both calender year taxpayers , and corporation C("C) with a fiscal year end June 30 from Partnetship P("P") on January 1 of year 1

The partnership business has has a agreement how to distribute the profit /loss amount of the partners .Its each partner has a right to share P/L as per the agreement states

Here B contributed his property with fair market value of $ 400,000 in exchange of 30%

Ownership , hence partner loss for year 1 is -$3,000 , 2nd year profit $4,500 and 3rd year $0

b)

Year 1	-3000
Year 2	4500
Year 3	0

Explanation : -

Here B contributes property with a fair market value "FMV" of $ 400,000 and adjusted non recourse mortgage of $100,000 (which is not qualified non - recourse financing) in exchnage for a 3000

That entitles the lender to repayment the loan is funding and not from any other of borrower

But partner has not qualifeied as non recourse financing and he can't add his income

C)

Year 1	-4000
Year 2	6000
Year 3	0

Explanation :-

"C" Contributed a property FMV $ 400,000 adjusted basis $500,000 in exchange for a 4,00,000

There is no other Income from "P" business as "C" Contribution on ownership basis

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