Let's address each requirement step by step: --- ### **a. Heidi’s Basis in Her Partnership Interest** #### **Heidi's Contribution:** - Adjusted basis of contributed property: **$22,000** - Less: Liability assumed by partnership (relieved from Heidi): **$16,000** #### **Heidi's Basis Calculation:** Heidi's initial basis in the partnership = Adjusted basis of property contributed - Liability relieved \[ \text{Heidi's Basis} = \$22,000 - \$16,000 = \$6,000 \] **Final Answer (a):** > **Heidi’s basis in her partnership interest immediately after formation is $6,000.** --- ### **b. Partnership’s Adjusted Basis in Property Contributed by Heidi** Under IRC Section 723, the partnership takes a carryover (substituted) basis for property contributed by a partner. \[ \text{Partnership's Basis} = \text{Heidi's adjusted basis in the property} = \$22,000 \] **Final Answer (b):** > **The 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:** - Partnership’s basis (carryover from Simon): **$15,000** - Sale price: **$23,000** #### **Gain or Loss Recognized:** \[ \text{Gain/Loss} = \text{Amount realized} - \text{Partnership's basis} \] \[ = \$23,000 - \$15,000 = \$8,000 \text{ gain} \] #### **Allocation of Gain:** - **Built-in gain** at contribution: FMV - basis = $25,000 - $15,000 = $10,000 (Section 704(c) gain) - If property is sold for $23,000, the realized gain is $8,000, which is less than the built-in gain. - Entire $8,000 gain is allocated to **Simon** (to the extent of built-in gain). **Final Answer (c):** > **The partnership recognizes a gain of $8,000 on the sale, and the entire $8,000 is allocated to Simon.** --- ### **d. Sale of Heidi’s Contributed Property for $49,000** #### **Heidi’s Property:** - Partnership’s basis: **$22,000** - Sale price: **$49,000** #### **Gain or Loss Recognized:** \[ \text{Gain/Loss} = \text{Amount realized} - \text{Partnership's basis} \] \[ = \$49,000 - \$22,000 = \$27,000 \text{ gain} \] #### **Allocation of Gain:** - **Built-in gain** at contribution: FMV - basis = $41,000 - $22,000 = $19,000 (Section 704(c) gain) - **$19,000** of the gain is allocated to **Heidi** (built-in gain). - The remaining gain (**$27,000 - $19,000 = $8,000**) is allocated equally among all four partners ($2,000 each). #### **Heidi’s share:** \[ \text{Heidi's total share} = \$19,000 + \$2,000 = \$21,000 \] **Final Answer (d):** > **The partnership recognizes a gain of $27,000 on the sale. Of this, $19,000 is allocated to Heidi (built-in gain), and the remaining $8,000 is shared equally among the four partners ($2,000 each), so Heidi's total share is $21,000.** --- ## **Summary Table** | Requirement | Amount Recognized | Allocation to Simon | Allocation to Heidi | |-------------|------------------|---------------------|--------------------| | a | $6,000 (basis) | | | | b | $22,000 (basis) | | | | c | $8,000 (gain) | $8,000 | $0 | | d | $27,000 (gain) | $2,000 | $21,000 | --- If you need explanations or tax code references for any part, just ask!