Loretta contributes property to a partnership in exchange for a 25 percent partnership interest.The property contributed has a fair market value of $45,000 and a basis of $35,000 on the date of the contribution to the partnership.In addition, Loretta receives a 10 percent partnership interest, valued at $18,000, in exchange for services rendered to the partnership.What is Loretta's basis in her partnership interest, immediately after these transactions?

Question

Quizplus · Accepted Answer

Loretta's basis in her partnership interest is calculated as the sum of her initial contribution's adjusted basis and the fair market value of any other consideration received. Therefore, her initial basis is $35,000 for the property she contributed. 
For the 25% partnership interest, the contribution is valued at ($45,000 * 25%) = $11,250. Her total basis for the partnership interest is $35,000 + $11,250 = $46,250. 
For services rendered, Loretta received a partnership interest worth $18,000, which means her total basis is now $46,250 + $18,000 = $64,250. 
Therefore, the correct answer is option C, i.e., $53,000.

Loretta Contributes Property to a Partnership in Exchange for a 25