Let's solve each part step-by-step: --- ### **a. Heidi’s Basis for her Partnership Interest** **Heidi's Initial Basis Calculation:** - Adjusted basis of property contributed: **$22,000** - Less: Liability transferred to partnership (deemed distribution): **($16,000)** - Plus: Heidi's share of the partnership liability (partnership has 4 partners, so 1/4 share): **$4,000** **Calculation:** 1. Start with basis of property contributed: $22,000 2. Subtract liability relieved: $22,000 - $16,000 = $6,000 3. Add back Heidi's share of the partnership liability: $6,000 + $4,000 = **$10,000** **Final Answer:** **Heidi’s basis for her partnership interest is $10,000.** --- ### **b. Partnership’s Adjusted Basis for Property Contributed by Heidi** Under IRC §723, a partnership’s basis in property contributed by a partner is the same as the partner’s adjusted basis at the time of contribution. - Adjusted basis of property contributed by Heidi: **$22,000** **Final Answer:** **Partnership’s adjusted basis for the property contributed by Heidi is $22,000.** --- ### **c. Sale of Simon’s Contributed Property for $23,000** - Simon’s property contributed: Adjusted Basis = $15,000; FMV at contribution = $25,000. - Partnership sells for $23,000. **Step 1: Calculate Partnership’s Gain/Loss on Sale** - Amount realized: $23,000 - Adjusted basis: $15,000 - Gain: $23,000 - $15,000 = **$8,000 gain** **Step 2: Allocation of Gain** - Built-in gain at contribution: $25,000 (FMV) - $15,000 (basis) = **$10,000 built-in gain** - Sale price ($23,000) is less than FMV at contribution, so only part of built-in gain is recognized (**$23,000 - $15,000 = $8,000 gain**). - Under §704(c), the **entire $8,000 gain** is allocated to **Simon** (up to the amount of built-in gain). **Final Answer:** - Partnership recognizes an **$8,000 gain**. - **Simon** is allocated the **entire $8,000 gain**. --- ### **d. Sale of Heidi’s Contributed Property for $49,000** - Heidi’s property contributed: Adjusted Basis = $22,000; FMV at contribution = $41,000. - Partnership sells for $49,000. **Step 1: Calculate Partnership’s Gain/Loss on Sale** - Amount realized: $49,000 - Adjusted basis: $22,000 - Gain: $49,000 - $22,000 = **$27,000 gain** **Step 2: Allocation of Gain** - Built-in gain at contribution: $41,000 (FMV) - $22,000 (basis) = **$19,000 built-in gain** - Under §704(c), **$19,000 of gain** is allocated to **Heidi** (up to the built-in gain). - Remaining gain: $27,000 - $19,000 = **$8,000** (post-contribution appreciation), allocated equally among 4 partners: $8,000 / 4 = **$2,000 each** **Final Answer:** - Partnership recognizes a **$27,000 gain**. - **Heidi** is allocated **$19,000 (704c gain) + $2,000 (post-contribution gain) = $21,000**. --- ## **Summary Table** | Question | Calculation | Final Answer | |----------|-------------|--------------| | a | $22,000 - $16,000 + $4,000 | $10,000 | | b | $22,000 | $22,000 | | c | $23,000 - $15,000 = $8,000 gain, all to Simon | $8,000 gain, all to Simon | | d | $49,000 - $22,000 = $27,000 gain ($19,000 to Heidi, $8,000 ÷ 4 = $2,000 each) | $27,000 gain; $21,000 to Heidi | If you need more explanation for any step, let me know!