George and Martha formed a partnership by each contributing $5,000 cash.The partnership then borrowed another $60,000 to finance its operations.If George and Martha are both general partners,compute each partner's initial basis in his/her partnership interest.
A)$5,000
B)$65,000
C)$35,000
D)$0

Question

Quizplus · Accepted Answer

Each partner's initial basis includes their cash contribution plus their share of the partnership's liabilities. Since they are general partners, they share the liability equally. Therefore, each partner's basis is $5,000 (cash contribution) + $30,000 (half of the $60,000 liability) = $35,000.

George and Martha Formed a Partnership by Each Contributing $5,000