Multiple Choice
Allen contributed land, which was being held for sale to Allen's customers, to a partnership in exchange for a 20% interest. The partnership uses the land in its business for three years and then sells the property. When the property was contributed, it had a basis in Allen's hands of $500,000 and an FMV of $600,000. The partnership sells the land for $700,000. The gain reported by the partnership is
A) $100,000 of ordinary income and $100,000 of Sec. 1231 gain.
B) $100,000 of Sec. 1231 gain and $100,000 of capital gain.
C) $200,000 of ordinary income.
D) $200,000 of Sec. 1231 gain.
Correct Answer:
Verified
Correct Answer:
Verified
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