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24 July, 12:49

Meredith and Katie form an equal partnership during the current year. Meredith contributes cash of $160,000, and Katie contributes property (adjusted basis of $90,000, fair market value of $260,000) subject to a nonrecourse liability of $100,000. As a result of these transactions, Katie has a basis in her partnership interest of $40,000.

True

False

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  1. 24 July, 13:04
    0
    False

    Explanation:

    Katie's S704 (c) allocation = $90,000 (basis of the transferred property) - $100,000 (debt) = $10,000

    The remaining debt of the partnership = $100,000 - $10,000 = $90,000

    Katie's basis in the partnership = 50% x remaining debt = 50% x $90,000 = $45,000
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