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At the beginning of the current? year, Hernandez and Curry formed the HC Partnership by transferring cash and property to the partnership in exchange for a partnership?interest, with each having a? 50% interest.? Specifically, Hernandez transferred property having a 30,000 ?FMV, a 28,000 adjusted? basis, and subject to a 9,000 ?liability, which the partnership assumed. Curry contributed 30,000 cash to the partnership. The partnership also borrowed 34,000 from the bank to use in its operations. All liabilities are recourse for which the partners have an equal economic risk of loss. During the current? year, the partnership earned 23,000 of net ordinary income and reinvested this amount in new property.


What is the? partnership’s and each? partner’s gain or loss recognized on the formation of the? partnership?


What is each? partner’s basis in his or her partnership interest at the end of the current? year?


For the? partnership, prepare a tax and book balance sheet at the end of the current year.


Assume instead that




formed a corporation rather than a partnership. What is the? corporation’s and each? shareholder’s gain or loss recognized on the formation of the? corporation? What is each? shareholder’s basis in his or her stock at the end of the current? year?


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