Clark and Lois formed an equal partnership three years ago. Clark contributed cash of $160,000 while Lois contributed land with a $90,000 adjusted basis and a $160,000 FMV. Three years later the land is sold for $210,000. The tax results to Clark and Lois are
A) $25,000 of gain to both Clark and Lois.
B) $60,000 of gain to both Clark and Lois.
C) $25,000 of gain to Clark and $70,000 gain to Lois.
D) $25,000 of gain to Clark and $95,000 gain to Lois.
D) $25,000 of gain to Clark and $95,000 gain to Lois.
Of the $120,000 ($210,000 - $90,000) gain, $70,000 ($160,000 - $90,000) of it is attributed to Lois since it existed at the date of her contribution, and the remaining $50,000 ($120,000 - $70,000) gain is allocated equally to Lois $25,000 and Clark $25,000. Thus, $25,000 gain is assigned to Clark; $95,000 ($70,000 + $25,000) is assigned to Lois.
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