Luis, Gabi, and Katherine form a partnership. Luis and Gabi give equipment and a building, respectively. Katherine agrees to perform all of the accounting and office work in exchange for a 10% interest. FMV Basis Partnership % Luis’s equipment $ 66,000 $ 11,000 45% Gabi’s building $ 66,000 $ 44,000 45% Katherine’s services $ 0 $ 0 10% Required:
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
Luis, Gabi, and Katherine form a partnership. Luis and Gabi give equipment and a building, respectively. Katherine agrees to perform all of the accounting and office work in exchange for a 10% interest.
| FMV | Basis | Partnership % | |
|---|---|---|---|
| Luis’s equipment | $ 66,000 | $ 11,000 | 45% |
| Gabi’s building | $ 66,000 | $ 44,000 | 45% |
| Katherine’s services | $ 0 | $ 0 | 10% |
Required:
- What amount of gain, if any, do each of the partners recognize? Note: Leave no cells blank - be certain to enter "0" wherever required.
- What is the basis for each partner in his or her partnership interest?
- What is the basis to the partnership of each asset?
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