Unicorn and Zebra form the UZ Co., a partnership.
Unicorn and Zebra form the UZ Co., a partnership. Unicorn contributes inventory with fair market value of $650,000 and an adjusted basis of $200,000 and cash of 350,000 for a 50% interest in the partnership. Zebra contributes computers, hardware, and proprietary software with a fair market value of $1,000,000 and a tax basis of $300,000 for a 50% interest in the partnership. The computer hardware, which was purchased from IBM on credit, is subject to an equipment loan of $300,000.
Please discuss the tax impact to:
- Zebra, and
- UZ Co.