On January 1 of the current year,Anna and Jason form an equal partnership.Anna contributes $50,000 cash and a parcel of land (adjusted basis of $100,000; fair market value of $150,000) in exchange for her interest in the partnership.Jason contributes property (adjusted basis of $180,000; fair market value of $200,000) in exchange for his partnership interest.Which of the following statements is true concerning the income tax results of this partnership formation?
A)Jason recognizes a $20,000 gain on his property transfer.
B)Jason has a $200,000 tax basis for his partnership interest.
C)Anna has a $150,000 tax basis for her partnership interest.
D)The partnership has a $150,000 adjusted basis in the land contributed by Anna.

Question

Quizplus · Accepted Answer

Anna's tax basis for her partnership interest is equal to the fair market value of the property she contributed, which is $150,000. Jason's tax basis for his partnership interest is equal to the adjusted basis of the property he contributed, which is $180,000. Therefore, statement A and B are both incorrect. The partnership will have a $150,000 adjusted basis in the land contributed by Anna, as stated in statement D, but this is not relevant to the income tax results of the partnership formation.

On January 1 of the Current Year,Anna and Jason Form