Larry and Jessica form the L&J Prtnership. Larry contributes property with an ad

Question

Larry and Jessica form the L&J Prtnership. Larry contributes property with an adjusted basis of $70,000, a fair market value of $200,000, and subject to a liability of $80,000 in exchange for a 40 percent interest in the partnership. Jessica receives a 60 percent interest in the partnership in exchange for services performed for the partnership, valued at $10,000, and cash of $170,000. a. What is Larry's basis in his partnership interest immediately after the formation of the partnership? b.What is Jessica's basis (after considering Larry's liability assumed by the partnership) in her partnership interest immediately after the formation of the partnership??

Explanation / Answer

After formation of the partnership $ Asset Values (Total) 240000 We consider the adjusted basis only for property Liabilities -80000 Net Valuation of Partnership 160000 Shares of Larry & Jessica for basis Larry 40% 64000 $ Jessica 60% 96000 $

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