Morgan and Kristen formed an equal partnership on August 1 of the current year. Morgan contributed $60,000 cash and land with a basis of $18,000 and a fair market value of $40,000. Kristen contributed equipment with a basis of
$42,000 and a value of $100,000. Kristen and Morgan both have a basis of $100,000 in their partnership interests.

Question

Quizplus · Accepted Answer

Morgan's basis in the partnership is $78,000 (cash $60,000 + land basis $18,000), while Kristen's basis is $42,000 (equipment basis). The fair market value does not affect the basis calculation for the partners.

Morgan and Kristen Formed an Equal Partnership on August 1