Morgan and Kristen formed an equal partnership on August 1 of the current year. Morgan contributed $60,000 cash and land with a basis of $18,000 and a fair market value of $40,000. Kristen contributed equipment with a basis of $42,000 and a value of $100,000. Kristen and Morgan each have a basis of $100,000 in their partnership interests.

Question

Quizplus · Accepted Answer

Morgan's basis in the partnership should be $78,000 (cash $60,000 + land basis $18,000), while Kristen's basis should be $42,000 (equipment basis $42,000). The fair market value does not affect the initial basis calculation for contributed property.

Morgan and Kristen Formed an Equal Partnership on August 1