Loretta contributes property to a partnership in exchange for a 25 percent partnership interest. The property contributed has a fair market value of $45,000 and a basis of $35,000 on the date of the contribution to the partnership. In addition, Loretta receives a 10 percent partnership interest, valued at $18,000, in exchange for services rendered to the partnership. What is Loretta's basis in her partnership interest, immediately after these transactions?

Question

Quizplus · Accepted Answer

Loretta’s basis in her partnership interest is equal to the total amount of cash and adjusted basis of the property she contributed, plus the value of the services she provided. Therefore, her total basis is:

Adjusted basis of property contributed: $35,000
Value of property contributed that exceeds adjusted basis: $10,000
Value of services rendered: $18,000
Total basis: $63,000

Therefore, the correct answer is (C).

Loretta Contributes Property to a Partnership in Exchange for a 25