On July 1 of the current year, Bertram acquired a 25 percent interest in Sycamore Company, a partnership, by contributing property with an adjusted basis of $7,000 and a fair market value of $12,000.The property was subject to a mortgage of $8,000, which was assumed by Sycamore Company.What is Bertram's basis in his partnership interest in Sycamore Company immediately after the partnership contribution?

Question

Quizplus · Accepted Answer

Bertram's basis in the partnership interest is calculated as his adjusted basis in the contributed property ($7,000) minus the portion of the mortgage assumed by the partnership that is attributable to his interest (25% of $8,000 = $2,000). Therefore, $7,000 - $2,000 = $5,000. However, since the mortgage exceeds the adjusted basis, the excess ($1,000) is treated as a gain, reducing the basis to $1,000.

On July 1 of the Current Year, Bertram Acquired a 25