On January 1 of the current year, Sarah and Bart form an equal partnership. Sara
ID: 2565322 • Letter: O
Question
On January 1 of the current year, Sarah and Bart form an equal partnership. Sarah makes a cash contribution of $60,000 and a property contribution (adjusted basis of $160,000; fair market value of $140,000) in exchange for her interest in the partnership. Bart contributes property (adjusted basis of $120,000; fair market value of $200,000) in exchange for his partnership interest. Which of the following statements is true concerning the income tax results of this partnership formation?
a.
Sarah has a $200,000 tax basis for her partnership interest.
b.
The partnership has a $140,000 adjusted basis in the property contributed by Sarah.
c.
Bart recognizes an $80,000 gain on his property transfer.
d.
Bart has a $120,000 tax basis for his partnership interest.
e.
None of the statements is true.
a.
Sarah has a $200,000 tax basis for her partnership interest.
b.
The partnership has a $140,000 adjusted basis in the property contributed by Sarah.
c.
Bart recognizes an $80,000 gain on his property transfer.
d.
Bart has a $120,000 tax basis for his partnership interest.
e.
None of the statements is true.
Explanation / Answer
Ans d. Bart has a $120,000 tax basis for his partnership interest. Bart basis in the partnership is equal to the adjusted basis of the property contributed which is $120000. The contribution is taxfree. If any doubt please comment. If satisfied you can rate the answer.
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