Cynthia sells her 1/3 interest in the CAR Partnership to Brandon for $95,000 cash. On the date of sale, the partnership balance sheet and agreed-upon fair market values were as follows. $\begin{array}{lrr}&\text { Adjusted } & \
&\text { Basis } & \text { FMV } \
\text { Cash } & \$ 40,000 & \$ 40,000 \
\text { Receivables } & -0- & 60,000 \
\text { Land } & \underline{50,000} & \underline{125,000} \
\text { Total } & \$ 90,000 & \$ 225,000\\\text { Cynthia, capital } & \$ 30,000 & \$ 75,000 \
\text { Arnold, capital } & 30,000 & 75,000 \
\text { Ralph, capital } & {30,000} & {75,000} \
\text { Total } & \$ 90,000 & \$ 225,000
\end{array}$ If the partnership has a § 754 election in effect, the total "step up" in basis of partnership assets allocated to Brandon is:

Question

Quizplus · Accepted Answer

The "step up" in basis is calculated as the difference between the amount paid by Brandon for the partnership interest ($95,000) and Cynthia's capital account ($30,000), which equals $65,000. This amount represents the increase in the basis of the partnership assets attributable to Brandon due to the § 754 election.

Cynthia Sells Her 1/3 Interest in the CAR Partnership to Brandon