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    Income tax: Partnership basis for Sarah and Bart

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    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.

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    Solution Preview

    Your answer is D.

    Bart basis for his partnership interest will be the ...

    Solution Summary

    The partnership basis for Sarah Bart is analyzed.