Question

Ruchi contributes property with an adjusted basis of $80,000 and a fair market value of $100,000 to a newly formed business entity. If the entity is a partnership and the transaction qualifies under § 721, the partnership's basis for the property and the partner's basis for the partnership interest are:

Asset Basis

Stock Basis

a.

$100,000 $100,000

b.

$100,000 $80,000

c.

$80,000 $80,000

d.

$80,000 $100,000

Answer 1

The asset value should be recognised in the books of accounts of the partnership firm as of the books of the previous owner i.e..,80000.

But the partnership interest of the partner in the firm should be recorded as 100000 due to the fair market value of the asset given as the asset given should be recorded in the fair market value if the asset came in or fmv of the asset given whichever is more clearly evident ,1st case in present situation.

Hence the remaining 20000should be recorded as the goodwill in the account of the partner

Hence awnser is option(b).