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Answer :
Final answer:
Morgan doesn't realize any gain or loss from her property to a partnership formation contribution to the Baby LLC, because no liability was assumed or transferred in the transaction.
Explanation:
Under the tax law, if a partner contributes property to a partnership, the partner does not realize a gain or loss unless the partnership also assumes the partner's liabilities that exceed the basis of the property contributed.
In Morgan's case, she transferred property with an adjusted basis of $380,000 and a fair market value of $360,000 to the Baby LLC.
Since no liability was transferred or assumed, no gain or loss would be recognized. So, Morgan doesn't realize and recognize any gain or loss in this property contribution transaction.
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