On January 5, 2018, 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, 2018?

Question

Quizplus · Accepted Answer

Mike's basis in Precision Tools Partnership as of January 5, 2018, is equal to the adjusted basis of the property contributed, decreased by the portion of the mortgage that he assumed. Therefore:

Basis = Adjusted basis of contributed property - Assumed mortgage
Basis = $20,000 - $8,000 (50% of the $16,000 mortgage)
Basis = $12,000

Therefore, the correct answer is (C) $12,000.

On January 5, 2018, Mike Acquires a 50% Interest in Precision