Cynthia sells her 1/3 interest in the CAR Partnership to Brandon for $95,000 cash.On the date of sale,the partnership balance sheet and agreed-upon fair market values were as follows: If the partnership has a § 754 election in effect,the total "step-up" in basis of partnership assets that will be allocated to Brandon is:

Question

Cynthia sells her 1/3 interest in the CAR Partnership to Brandon for $95,000 cash.On the date of sale,the partnership balance sheet and agreed-upon fair market values were as follows:  If the partnership has a § 754 election in effect,the total "step-up" in basis of partnership assets that will be allocated to Brandon is:

Quizplus · Accepted Answer

The total "step-up" in basis of partnership assets that will be allocated to Brandon is equal to the excess of the fair market value of his share of the partnership assets over its adjusted basis. Brandon paid $95,000 for a 1/3 interest in the partnership, and therefore his share of the partnership assets is valued at 3 times that amount, or $285,000. The adjusted basis of his share of the partnership assets is equal to 1/3 of the partnership's adjusted basis in its assets, which is $220,000. Therefore, the "step-up" in basis allocated to Brandon is $65,000 ($285,000 - $220,000).

Cynthia Sells Her 1/3 Interest in the CAR Partnership to Brandon