Ken and Lars formed the equal KL Partnership during the current year, with Ken contributing $100,000 in cash and Lars contributing land (basis of $60,000, fair market value of $40,000) and equipment (basis of $0, fair market value of $60,000). Lars recognizes a $40,000 gain on the contribution and his basis in his partnership interest is $100,000.

Question

Quizplus · Accepted Answer

Lars has a $20,000 loss on the contribution ($60,000 basis - $40,000 fair market value), not a gain. Therefore, his basis in his partnership interest would be $80,000 ($60,000 basis in land - $20,000 loss + $0 basis in equipment + $40,000 gain recognized = $80,000).

Ken and Lars Formed the Equal KL Partnership During the Current