Question

On January 1 of the current year, Anna and Jason form an equal partnership. Anna contributes $50,000 cash and a parcel of land (adjusted basis of $200,000; fair market value of $150,000) in exchange for her interest in the partnership. Jason contributes property (adjusted basis of $180,000; 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. Jason has a $200,000 tax basis for his partnership interest.b. Anna has a $250,000 tax basis for her partnership interest.c. The partnership has a $150,000 adjusted basis in the land contributed by Anna.d. Jason recognizes a $20,000 gain on his property transfer.e. Anna realizes and recognizes a $50,000 loss.

Answer 1

Answer:

B . Anna has a $250 000 tax basis for her partnership interest

Explanation:

Contribution of cash $50000

Adjusted basis of $200000

Adding the two we get adjusted tax basis for Anna as

$50000+$200000

=$250000

adjusted basis for Jason $ 180000 NOT $200000  adjusted basis of Anna contribution in land is $200000. Jason and Anna will not recognize and a gain or loss in their contributions

Answer 2

Answer:B-

Anna has a $250,000 tax basis for her partnership interest.

Explanation:

Since the e substituted basis rules of section 722 and 723 applys, Jason's basis for his partnership interest will be the same as his $180,000 basis for the property contributed. Anna will have a $250,000 tax basis for her partnership interest, Also the partnership will have a $200,000 adjusted basis for the land contributed by Anna and neither Jason nor Anna will recognize a gain or loss on their property contributions.