Yong contributes a machine having an adjusted basis of $20,000 and an FMV of $25,000 for a 10% partnership interest. Yong had taken $10,000 of depreciation prior to the contribution. The partnership has no liabilities. As a result of the contribution, Yong must recognize ... ?

a. no gain or loss.

b. a $5,000 Sec. 1245 gain.

c. a $5,000 capital gain.

d.$10,000 ordinary income.

Question

Business

Ronan Horton

3 September, 22:14

Yong contributes a machine having an adjusted basis of $20,000 and an FMV of $25,000 for a 10% partnership interest. Yong had taken $10,000 of depreciation prior to the contribution. The partnership has no liabilities. As a result of the contribution, Yong must recognize ... ?

a. no gain or loss.

b. a $5,000 Sec. 1245 gain.

c. a $5,000 capital gain.

d.$10,000 ordinary income.

+5

Answers (1)

Know the Answer?

Godiva · Answer 1

The correct answer is option (a).

Explanation:

According to the scenario, the computation of the given data are as follows:

Adjusted basis of machine contributed = $20,000

FMV of machine contributed = $25,000

As, the gain or loss can be recognized after the some period of running business.

Gain or loss can not be computed at the time of starting the business or contributing to business.

So, According to the scenario, No gain or loss is the correct answer.