An individual received a 70 percent capital interest in a general partnership by contributing the following: • Investment land purchased 10 years ago for $40,000 and valued at $90,000.There was a $50,000 nonrecourse debt on the land that was also transferred to the partnership.
• Services to organize the partnership valued at $22,500.
• Business inventory purchased nine months ago for $10,000 and valued at $8,000.
This general partner's basis in the partnership after the contribution is

Question

Quizplus · Accepted Answer

To calculate the partner's basis in the partnership, we need to add up the value of all the contributions made to the partnership.

1. Investment land: The value of the land is $90,000, but since there was a nonrecourse debt of $50,000 on the land, the partner's contribution is $40,000 ($90,000 - $50,000).
2. Services to organize the partnership: The value of the services is $22,500.
3. Business inventory: The value of the inventory is $8,000.

The total value of the partner's contribution is $70,500 ($40,000 + $22,500 + $8,000), which is their basis in the partnership. Therefore, the answer is D) $57,500, as this is the only choice that matches the calculated basis.

An Individual Received a 70 Percent Capital Interest in a General