Nanette and Noreen formed the NN Partnership.Nanette contributed $50,000 of cash in exchange for her 50% interest in the partnership capital and profits.Noreen contributed property with an adjusted basis of $25,000 and a fair market value of $50,000 for her 50% interest in the partnership capital and profits.During the first year of partnership operations, the following events occurred: the partnership had a net taxable income of $120,000; Nanette received a distribution of $16,000 cash from the partnership; and she had a 50% share in the $80,000 of partnership recourse liabilities on the last day of the partnership year.Nanette's adjusted basis for her partnership interest at year-end is:
A)$50,000
B)$134,000.
C)$150,000.
D)$166,000.
E)None of the above.

Question

Quizplus · Accepted Answer

Nanette's initial basis is $50,000 (cash contributed). Add her share of taxable income ($60,000) and her share of recourse liabilities ($40,000). Subtract the cash distribution ($16,000). Her adjusted basis is $134,000.

Nanette and Noreen Formed the NN Partnership