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24 May, 16:52

When Padgett Properties LLC was formed, Nova contributed land (value of $340,500 and basis of $85,125) and $170,250 cash, and Oscar contributed cash of $510,750. Both partners received a 50% interest in partnership profits and capital. a. How is the land recorded for § 704 (b) book capital account purposes? For § 704 (b) book capital account purposes, Padgett records the land at $. b. What is Padgett's tax basis in the land? $ c. If Padgett sells the land several years later for $510,750, how much tax gain will Nova and Oscar report? Nova reports a $ gain and Oscar's gain is $.

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  1. 24 May, 17:09
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    See the explanation below:

    Explanation:

    a. How is the land recorded for § 704 (b) book capital account purposes? For § 704

    Debit cash with $170,250

    Debit land with $340,500

    Credit Nova's Capital account with $510,750

    b. What is Padgett's tax basis in the land?

    Padgett's tax basis in the land is $85,125 that is carried over.

    c. If Padgett sells the land several years later for $510,750, how much tax gain will Nova and Oscar report?

    Built in gain = $340,500 - $85,125 = $255,375

    Gain from sale = $510,750 - $340,500 = $170,250

    Share of gain from sale = $170,250 * 50% = $85,125

    Gain to report by Nova = Built in gain + Share of gain from sale = $255,375 + $85,125 = $340,500

    Gain to report by Oscar = Share of gain from sale = $170,250 * 50% = $85,125
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Home » Business » When Padgett Properties LLC was formed, Nova contributed land (value of $340,500 and basis of $85,125) and $170,250 cash, and Oscar contributed cash of $510,750. Both partners received a 50% interest in partnership profits and capital. a.
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