At the beginning of the year,Leilani contributes property to a partnership in exchange for a 20 percent partnership interest.The property contributed has a fair market value of $60,000 and a basis of $40,000 on the date of the contribution to the partnership.In addition,Leilani receives a 10 percent partnership interest,valued at $30,000,in exchange for services rendered to the partnership in the prior year.The partnership earned $90,000 during the year.What is Leilani's basis in her partnership interest at the beginning of the year and at the end of the year?

Question

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Leilani's initial basis is $70,000, which includes the $40,000 basis of the contributed property and the $30,000 value of the partnership interest received for services. At the end of the year, her basis is $97,000, which includes her share of the partnership's earnings ($90,000 * 30% = $27,000) added to her initial basis.

At the Beginning of the Year,Leilani Contributes Property to a Partnership