Marlena contributes property having a $30,000 FMV and a $27,000 adjusted basis a

Question

Marlena contributes property having a $30,000 FMV and a $27,000 adjusted basis and also renders accounting services valued at $15,000 in exchange for a 30% interest in the capital and profits of the BBB partnership. LeBron contributes a building with a $100,000 FMV, an adjusted basis of $88,000, and subject to a mortgage of $80,000 for a 40% interest in the capital and profits of the BBB partnership. The partnership assumes the mortgage. Ty contributes cash of $60,000 for a 30% interest in the capital and profits of the BBB partnership.

a. What is each partner's respective basis in the partnership? (Show calculation)

b. What are the current income tax consequences to each partner? (Show calculation)

c. What is the partnership's basis in the assets transferred in by the partners? (Show calculation)

Explanation / Answer

a Answer :-

Basis in partnership interest

b Answer :-

Marlena recognises income of $30,000, the fair market value of the services provided. Lebron recognises basis in partnership interest of $44000

C Answer :- The partnership takes a carry over basis in the assets:-

Assets from Marlena = $27000

Assets from Lebron = $88000

Particulars Marlena Lebron Adjusted basis of property contributed $27000 $88000 FMV of services provided to the partnership $30000 Share of mortgage assumed:- $80000 × 60% = $ 48000 $48000 $80000 × 40% = $32000 $36000 Less: Decrease in Lebron liabilities ($80000) Tentative basis in partnership interest $105000 $44000

Basis in partnership interest

$105,000 $44,000

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