Question

Joseph contributed $25,000 in cash and equipment with a tax basis of $6,400 and a fair market value of $12,600 to Berry Hill Partnership in exchange for a partnership interest.
a. What is Joseph’s tax basis in his partnership interest?
b. What is Berry Hill’s basis in the equipment?

Answer 1

Answer:

(A) $31,400

(B) $6,400

Explanation:

Joseph contributed $25,000 in cash and equipment

The tax basis is $6,400

The fair market value paid to Bill hill partnership is $12,600

(A) Joseph tax basis in his partnership interest can be calculated as follows

= contribution+tax basis

= $25,000+$6,400

= $31,400

(B) Since Joseph contributed a tax basis of $6,400 to Bill hill partnership in exchange for a partnership interest then, Bill hill's basis in the equipment is $6,400