On January 5,2017,Mike acquires a 50% interest in Precision Tools Partnership by contributing property with an adjusted basis of $20,000 and a fair market value of $24,000,subject to a mortgage of $16,000.What is Mike's basis in Precision Tools Partnership as of January 5,2017?

Question

Quizplus · Accepted Answer

When Mike acquires a 50% interest in Precision Tools Partnership by contributing property with an adjusted basis of $20,000 and a fair market value of $24,000, subject to a mortgage of $16,000, his basis in the partnership will be calculated as follows:

Adjusted basis of contributed property = $20,000
Fair market value of contributed property = $24,000
50% share in partnership = $12,000
Minus share of partnership liability = $0 (since share of liability is equal to adjusted basis of contributed property)

Therefore, Mike's basis in Precision Tools Partnership as of January 5, 2017, would be $12,000.

On January 5,2017,Mike Acquires a 50% Interest in Precision Tools