In 2007 Sally Smith contributed property to a new partnership in return for a 50% interest in capital and profits. The property had a fair market value of $10,000, an adjusted basis of $6,000, and was subject to a $9,000 mortgage which was assumed by the partnership. What was Smith's basis in the partnership as a result of this contribution?
Choices- $0, $500, $1,500, or $5,500
Treas. Reg. Sec. 1.722-1 states that " The basis to a partner of a partnership interest acquired by a contribution of property, including money, to the partnership shall be the amount of money contributed plus the adjusted basis at the time of contribution of any property contributed. ... If the ...
After citing the pertinent legal authority, this solution discusses a partner's basis in property contributed to a partnership subject to a mortgage.