John contributes land having $110,000 FMV and a $90,000 adjusted basis which is subject to a $60,000 mortgage in exchange for a one-third interest in the AJK Partnership.The partnership owes no other liabilities.After the contribution,Abby,John,and Kent share profits and losses equally and each has a one-third interest in the partnership capital.John's basis in the partnership interest is
A)$50,000.
B)$90,000.
C)$110,000.
D)$150,000.

Question

Quizplus · Accepted Answer

John's basis in the partnership interest is calculated as his adjusted basis in the land ($90,000) minus the mortgage assumed by the partnership ($60,000), plus his share of the partnership's liabilities (one-third of $60,000, which is $20,000). Therefore, his basis is $90,000 - $60,000 + $20,000 = $50,000.

John Contributes Land Having $110,000 FMV and a $90,000 Adjusted