Question

This year, Callie and Neil formed the equally owned CN partnership. Callie contributed $300,000 of cash and Neil contributed real estate valued at $450,000 (adj. basis of $100,000). The property was subject to a nonrecourse liability of $150,000 that was assumed by the partnership.
a.   What are Neil’s and Callie’s bases in the partnership interest immediately after the partnership was formed.

b. How is the debt allocated between them?

Answer 1

Answer:

1. a. Callie =$375,000

b. Neil $25,000

2. Equal

Explanation:

The computation of given question is shown below:-

1. Adjusted Callie contribution = $300,000

Neil contribution = $100,000 × 50%

= $75,000

Callie basis in partnership interest after the formation = $300,000 + $75,000

= $375,000

Adjusted Neil contribution = $100,000

Neil contribution = $100,000 × 50%

= $75,000

Neil basis in partnership interest after the formation = $375,000 - $75,000

= $25,000

2. Equal or in Profit-Loss Sharing Ratio

In the profit - loss sharing ratio or equal when debt is allocated between the two partners