Partners X and Y form an equal 50/50 partnership. Partner X contributes property having a...
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Partners X and Y form an equal 50/50 partnership. Partner X contributes property having a fair market value of $40,000 and a basis of $20,000 to the partnership. Partner Y contributes $40,000 in cash. If the partnership disposes of the property for $50,000, how much gain will each partner recognize?
A) Both partners will recognize a $15,000 gain, equal to 50% of the $30,000 gain on the sale of the property.
B) Partner X will recognize a $20,000 gain and partner Y will recognize a $10,000 gain.
C) Partner X will recognize a $25,000 gain and partner Y will recognize a $5,000 gain.
D) Partner X will recognize the full $30,000 of gain because the property had a built-in gain at the time it was contributed. Partner Y will recognize no gain.
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