Incorporation of Plummet Company

Plummet Company is created with the following asset contributions. John and Jill are equal owners in this new business venture.
Shareholder Assets Basis Fair Market Value
Jill Land 40,000 200,000*
*The land is subject to a liability in the amount of $50,000 that the Company assumes.

Plummet Company
Assume that John and Jill choose to operate their business as a partnership for tax purposes. How will the change in entity for tax purposes affect your answers in Module 2
Address the specific questions below for this module:
Does the above transaction qualify for a tax-free exchange similar to Sec. 351 for corporations If so, what code section contains the rule for tax-free exchanges for partnerships
Compute the partners’ basis in the units received in the exchange.
Prepare a tax balance sheet for Plummet Company (assuming it is a partnership).
Comment on the tax issues facing John and Jill in connection with withdrawing money from the partnership Discuss the same options as in Module 2 and show the associated tax consequences.