Partnership Adjusted Basis
Paul and Pat are forming the P&P Partnership. Paul contributes $120,000 cash and Pat contributes nondepreciable property with an adjusted basis of $90,000 and a fair market value of $150,000. The property is subject to a $30,000 liability, which is also transferred into the partnership and is shared equally b the partners for basis purposes. Paul and Pat share in all partnership profits equally except for any precontribution gain, which must be allocated according to the statutory rules for built-in gain allocations.
a. What is Pat's adjusted tax basis for her partnership interest immediately after the partnership is formed?
b. What is the partnership's adjusted basis for the property contributed by Pat?
c. If the partnership sells the property contributed by Pat for $180,000, how is the tax gain allocated between the partners?
This is a variation of another solution, the names and amounts change, but the principle of the question is the same: how is a new partnership and their individual taxes affected by certain business moves? This solution discusses those situations and answers the questions provided.
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