Liz and John formed the equal LJ Partnership on January 1 of the current year. Liz contributed $80,000 of cash and land with a fair market value of $90,000 and an adjusted basis of $75,000. John contributed equipment with a fair market value of $170,000 and an adjusted basis of $20,000. John had used the equipment in his sole proprietorship.

This question is incomplete, here's the complete question:

Liz and John formed the equal LJ Partnership on January 1 of the current year. Liz contributed $80,000 of cash and land with a fair market value of $90,000 and an adjusted basis of $75,000. John contributed equipment with a fair market value of $170,000 and an adjusted basis of $20,000. John had previously used the equipment in his sole proprietorship.

a. How much gain or loss will Liz, John, and the partnership realize?

b. How much gain or loss will Liz, John, and the partnership recognize?

c. What bases will Liz and John take in their partnership interests?

d. What bases will LJ take in the assets it receives?

e. Are there any differences between inside and outside basis? Explain.

f. How will the partnership depreciate any assets it receives from the partners?

Explanation:

a. Liz: Gain = $90,000 - $75,000 = $15,000

John: Gain = $170,000 - $20,000 = $150,000

Partnership: The overall value of property that was received

b. As per section 721, There is no gain or loss that is identified by partnership or other partners when forming the entity.

c. Liz: Substituted basis = $80,000 + $75,000 = $155,000

John: Substituted basis = $20,000 i.e. in equipment

d. Partnership LZ : Carry over basis = $80,000 + $75,000 + $20,000 = $175,000

e. No, there is no difference.

Inside basis : $80,000 + $75,000 + $20,000 = $175,000

Liz will realise a gain of $15,000 on the land; John will realise $150,000 on his equipment and the partnership will realise no gain or loss.

Explanation: A partnership is a form of business arrangement whereby individuals come together as partners to meet business objectives share both benefits and risks.

In the LJ partnership, since Liz brought land with fair value of $90,000 and an adjusted basis of $75,000 she will realise a gain of $15,000 ($90,000 - $75,000).

John on the otherhand contributed his equipment with a fair value of $170,000 with an adjusted basis of $20,000 he will realize a gain of $150,000 ($170,000 - $20,000)

answer; standing committee;