The XYZ partnership has the following balance sheet: Assets...
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Accounting
The XYZ partnership has the following balance sheet:
Assets
Tax Basis
FMV
Real estate
$120,000
$180,000
Liabilities
$0
$0
Capital
X
$40,000
$60,000
Y
$40,000
$60,000
Z
$40,000
$60,000
$120,000
$180,000
If Q provides $45,000 of services in exchange for a $25% interest in the partnership, what is the tax effect to Q, X, Y, Z, and XYZ? Assume all of the partners are individuals. How much income does Q recognize? How much gain do X, Y, and Z recognize? How much of a deduction do they get? What basis will XYZ have in the Real estate? What is the balance sheet afterward? If the property is later sold for $180,000, how much gain will each partner recognize? What if it is later sold for $200,000?
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