Julie and Kate form an equal partnership during the current year.Julie contributes cash of $160,000, and Kate 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, Kate has a basis in her partnership interest of $40,000.

Question

Quizplus · Accepted Answer

Kate's basis in her partnership interest is determined by the total value of her contribution, which is the adjusted basis of the property she contributed plus any liabilities assumed by the partnership. Therefore, Kate's initial basis should be calculated as follows:

Adjusted basis of property contributed: $90,000
Nonrecourse liability assumed by partnership: $100,000
Total value of contribution: $190,000
Kate's percentage share: 50%
Kate's initial basis: $95,000

Since the question states that Kate's basis is only $40,000, it must be false.

Julie and Kate Form an Equal Partnership During the Current