What is their contribution?

Question 2

Amelia, Ben, and Cameron formed a partnership in the ratio of 1: 3: 5. If Cameron's contribution was $ 25,000, how much did Alex and Ben contribute?

Adam, Linda, and Mike are considering starting a bakery togetherin Burlington, VT called Vermont Bakes. They have come to youlooking for advice on the advantages and disadvantages of eachbusiness entity. Adam and Linda will each own 40% of the businessand Mike will own 20%. Adam would like to contribute cash of$40,000, Linda will contribute land with an FMV of $60,000 and anadjusted basis of $25,000. Mike will contribute services of$20,000. In addition, Linda receives $20,000 of cash. Adam, Linda& Mike have indicated that they would like to takedistributions of profits from Vermont Bakes each year in additionto compensation. They plan to pay themselves compensation of$45,000 each and they project that Vermont Bakes will have $10,000in profits each year that they would like to distribute based ontheir ownership percentages. The distributions are as follows:

Adjusted Basis FMV

Adam - Equipment $2,000 $4,000

Linda - Cash $4,000 $4,000

Mike - Cash $2,000 $2,000

1. Calculate Adam, Linda & Mike's basis in their ownershipinterest if they were part of a prearranged plan to incorporateVermont Bakes as a C corporation. Calculate the basis the Ccorporation would take in the property contributed by Adam, Linda& Mike. Calculate the realized and recognized gain to Adam,Linda & Mike on their contribution to the C corporation (ifany).

2. Calculate Adam, Linda & Mike's basis in their ownershipinterest if they decided to form Vermont Bakes as a partnership.Calculate the basis the partnership would take in the propertycontributed by Adam, Linda & Mike. Calculate the realized andrecognized gain to Adam, Linda & Mike on their contribution tothe partnership (if any).