Mary and Doris Form MD General Partnership

Essay

Mary and Doris form MD general partnership. Mary transfers a building with a fair market value of $800,000 and a basis of $400,000 that is encumbered by a $100,000 mortgage that the partnership assumes in exchange for a 50 percent interest in the general partnership. Doris contributes equipment valued at $900,000 with a basis of $500,000 that is encumbered by a $200,000 liability that the partnership assumes in exchange for the other 50 percent general partnership interest. What are Mary and Doris's realized and recognized gains and their bases in their partnership interests. What is the partnership's basis in the contributed assets?