C 9-5 a) No he should not contribute the property to the partnership. This would generate a capital loss if sold by the contributing partner rather than contributed to the partnership. The amount of the loss may not exceed the capital loss the contributing partner would have recognized had they sold the property on the contribution date. b) The other option that the partner has is to sell or lease the property to the partnership or they can sell the property to a third party who can then contribute the property to the partnership. c) The tax implications that the partner will face are that the ordinary income recognition is required on a partner’s sale of the property to the partnership. This is where the seller owns more than 50% of the capital or profits interests if the property is depreciable, or is not a capital asset in the partnership. If the land is leased to the partnership then the partner will have the depreciation and other deductions from the property. The rentals that are received from the partnership will be taxed as ordinary income. If the property is sold to a third party, it is taxed as and other sale would be.

C 9-6 a) The liability will affect the amount of gain that Jane must recognize because the partner recognizes gain on the contribution of property and assumption of a liability if the amount of the liability assumed by the other will exceed the contributing partner’s basis in the contributed property plus her share of the existing partnership liability.

C 9-7 a) Yes the legal fees for drawing up the partnership agreement can be deducted. b) Yes the accounting fees for establishing an accounting system can be deducted. c) No the fees for securing an initial working capital loan cannot be deducted. d) Yes the filing fees that are required under state law in initial year to conduct business in the state.