On January 5,2016,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 5,2016?

Question

Quizplus · Accepted Answer

Mike's basis in the partnership will be determined by the adjusted basis of the property he is contributing minus any liabilities assumed. In this case, the adjusted basis of Mike's property is $20,000, and the liability assumed is $16,000. Therefore, Mike's basis in the partnership is $20,000 - $16,000 = $4,000. Since Mike has acquired a 50% interest, his share of the basis will be $4,000 x 50% = $2,000. Mike's share of the fair market value of the property is $24,000 x 50% = $12,000. Therefore, Mike's basis in the partnership is $12,000.

On January 5,2016,Mike Acquires a 50% Interest in Precision Tools