Partner X contributes property with a FMV of $100,000 and a basis of $60,000 to a partnership. Two years later, the partnership sells the property for $120,000. How is the gain allocated under Section 704(c)?

1. Identify Built-in Gain (BIG): $100,000 FMV - $60,000 Basis = $40,000.<br/>2. Total Tax Gain on Sale: $120,000 Sale - $60,000 Basis = $60,000.<br/>3. Allocation Rule (704(c)): The BIG ($40,000) must be allocated to the contributing partner (X).<br/>4. Remaining Gain: $60,000 - $40,000 = $20,000. This is allocated according to the partnership agreement (shared).<br/>5. Result: X gets $40,000 + share of $20,000.