Question

An equal partnership is formed by Rita and Gerry. Rita contributes cash of $10,000 and a building with a fair market value of $150,000, adjusted basis of $55,000, and subject to a liability of $60,000. Gerry contributes cash of $100,000. What amount of gain must Rita recognize as a result of this transaction?A. $35000
B. $65000
C. $70000
D. $25000
E. None of these choices are correct

Answer 1

Answer:

A. $35000

Explanation:

The computation of the amount of gain that recognized is shown below:

= Value of the building adjusted + cash contributed - building liability + 50%  shares on debt

= $55,000 + $10,000 - $60,000 + $60,000 × 50%

= $55,000 + $10,000 - $60,000 + $30,000

= $35,000

Hence, the  amount of gain that recognized is $35,000

Therefore the correct option is A.

We simply applied the above formula so that the correct value could come

And, the same is to be considered