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Angie and Carmen form the AC partnership, with each owning a 50% interest.

Angie contributes
$40,000 and a personal automobile worth $20,000, with an adjusted basis of $25,000, owned 10
years. Carmen contributes a Minolta copier, held several years, with a gross value of $69,000,
subject to a $9,000 recourse liability (thus, the net value of the copier is $60,000); the copiers
adjusted basis is $10,000. Determine whether Angie and Carmen have any gain or loss on
formation of the AC partnership, the tax basis and holding period of each partners partnership
interest, and the tax basis and holding period to the partnership with respect to each asset
Angie Capital:
Interest = 50%
Assets:
Cash = $40,000

Total assets = $40,000 + $20,000 = $60,000

Automobile:
Value= $20,000
Basis = $25,000 > 1oyrs old

Carmen Capital:
Interest = 50%
Assets:
Copier = $69,000 - $9,000 (liability) = $60,000 > Adj. Basis = $10,000
Carmen total assets = $60,000
Total Partnership Capital
= $60,000 + $60,000 = $120,000
Responses:
i.

Upon formation of the partnership, the total contributed assets by each partner amounted
to $60,000 each, therefore neither recorded a loss nor gain as a result of the partnership.

ii.

However, when factoring in each partners basis, Angie contributed more to the new
partnership than Carmen, which does not however imply a loss or gain of any kind.
Generally, Angie is set to lose more due to the partnerships tax basis than does Carmen,
while the holding period of each asset may not affect the firm so much. This is because
IFRS allow entities to revalue assets received either as donations, or acquisitions in a
manner that the useful life of the asset may also be adjusted. This then means that the
holding period will have to be re-determined once the assets have been enjoined as being
held by the new partnership.