Alanna contributes property with an adjusted basis of $80,000 and a fair market value of $100,000 to a newly formed business entity.If the entity is a partnership and the transaction qualifies under § 721,the partnership's basis for the property and the partner's basis for the partnership interest are: Asset Basis Stock Basis
A)$ 80,000 $100,000
B)$100,000 $ 80,000
C)$ 80,000 $ 80,000
D)$100,000 $100,000
E)None of the above.

Question

Quizplus · Accepted Answer

When property is contributed to a partnership under § 721, the partnership's basis for the property is equal to the partner's adjusted basis in the property immediately prior to the contribution. Therefore, the partnership's basis for the property will be $80,000. The partner's basis in the partnership interest is equal to the amount of money and the adjusted basis of any property contributed to the partnership. In this case, the partner contributes property with a fair market value of $100,000 but an adjusted basis of $80,000. Therefore, the partner's basis in the partnership interest will be $80,000. The correct answer is (C).

Alanna Contributes Property with an Adjusted Basis of $80,000 and a Fair