Problem NO: 5

Cosmo contributed land with a fair market value of $400,000 and a tax basis of $90,000 to the Y Mountain partnership in exchange for a 25 percent prof

Cosmo contributed land with a fair market value of $400,000 and a tax basis of $90,000 to the Y Mountain partnership in exchange for a 25 percent profits and capital interest in the partnership. The land is secured by a $120,000 nonrecourse liability. Other than this nonrecourse liability, Y Mountain partnership does not have any liability.

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a. How much gain will Cosmo recognize from the contribution?

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b. What is Cosmo’s tax basis in his partnership interest?

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