Sebastian contributed property with a tax basis of $30,000 and a fair market value of $75,000 to a new partnership in exchange for a 50 percent interest.The property was encumbered by a $50,000 mortgage that the partnership assumed.The other partner contributed $25,000 cash.What is Sebastian's basis in his partnership interest?
A)$5,000
B)$25,000
C)$30,000
D)$50,000

Question

Quizplus · Accepted Answer

Sebastian's initial basis is $30,000 (his tax basis in the property). He is relieved of $25,000 of the mortgage (50% of $50,000), which reduces his basis. Therefore, his basis is $30,000 - $25,000 = $5,000.

Sebastian Contributed Property with a Tax Basis of $30,000 and a Fair