Daniel acquires a 30% interest in the PPZ Partnership from Paolo, an existing partner for $39,000 of cash. The PPZ Partnership includes $10,000 of recourse liabilities. What is Daniel's basis in his partnership interest?

Question

Quizplus · Accepted Answer

Daniel's basis in his partnership interest is determined as follows:
Total consideration paid = $39,000
Percentage interest acquired = 30%
Therefore, the value of the entire partnership is calculated as: 
Total consideration paid ÷ Percentage interest acquired
= $39,000 ÷ 0.30
= $130,000

The basis in the partnership interest is calculated as the sum of the consideration paid plus the share of partnership liabilities assumed. Since the partnership has $10,000 of recourse liabilities, Daniel's basis in his partnership interest would be:
$39,000 + ($10,000 x 30%) = $42,000.

Daniel Acquires a 30% Interest in the PPZ Partnership from Paolo