Rhonda contributes land valued at $90,000 in exchange for a 40% interest in the RW Partnership.The adjusted basis of the land is $80,000 and it was subject to a liability of $20,000,which the partnership assumed.RW reported income of $100,000 for the year.If none of the liabilities are repaid by the end of the year,and if all liabilities are shared equally,Rhonda's basis at the end of the year is $108,000.

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Rhonda's initial basis in the partnership is $90,000 (the fair market value of the land she contributed). Since the partnership assumed a liability of $20,000, her adjusted basis is $80,000. Her share of the income is 40% of $100,000, which is $40,000. Since the liabilities are shared equally, Rhonda's share of the liability is $10,000. Therefore, her ending basis is $80,000 (initial basis) + $40,000 (her share of the income) - $10,000 (her share of the liability) = $108,000.

Rhonda Contributes Land Valued at $90,000 in Exchange for a 40