Question

Tom and Jerry decide to start a Limited Partnership with Tom being the general partner and...

Tom and Jerry decide to start a Limited Partnership with Tom being the general partner and Jerry being the limited partner. Tom contributes cash of $20,000 to the partnership and Jerry contributes land with a basis of $20,000, fair market value of $40,000. The land is encumbered by a recourse mortgage of $20,000. Jerry’s basis in his partnership interest is:

a. $30,000 b. $10,000 c. $40,000 d. $0

Homework Answers

Answer #1

Since the land is encumbered, the fair market value should not be considered.

Assume, each partner has 50% interest in the partnership.

J’s basis = Adjusted basis – (50% of mortgage)

               = 20,000 – (20,000 × 50%)

               = 20,000 – 10,000

               = $10,000

Answer: b

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Three Partners Chris, Joe, and Harry form a partnership with Chris and Joe are general partners...
Three Partners Chris, Joe, and Harry form a partnership with Chris and Joe are general partners with each have a 40% interest, and Harry is a limited partner with a 20% interest (assume they satisfy the tests for substantial economic effect under Section 704(b)). Chris contributes $10,000, Joe contributes $20,000, and Harry contributes $40,000. The partnership borrows $30,000 on a recourse basis and uses the proceeds, along with each partner’s cash contributions, to purchase land for $100,000. What is each...
The BAM Partnership distributed the following assets to partner Barbie in a proportionate nonliquidating distribution: $10,000...
The BAM Partnership distributed the following assets to partner Barbie in a proportionate nonliquidating distribution: $10,000 cash, land parcel A (basis of $5,000, fair market value of $30,000) and land parcel B (basis of $10,000, fair market value of $30,000). Barbie's basis in her partnership interest was $40,000 immediately before the distribution. Barbie will allocate a basis of $10,000 and $20,000, respectively, to the two land parcels, and her basis in her partnership interest will be reduced to $0. True...
Gerald received a 1/3 capital and profits limited partnership interest in the XYZ limited partnership. In...
Gerald received a 1/3 capital and profits limited partnership interest in the XYZ limited partnership. In exchange for this interest, Gerald contributed a building with a fair market value of $30,000 with an adjusted basis to Gerald of $ 15,000. It was encumbered by a $ 9,000 nonrecourse debt that the general partners of XYZ personally assumed. What is Gerald's basis in his partnership interest immediately after this contribution? Which is right ? $6,000 $ 9,000 $ 21,000 $ 24,0000
DT and HC are equal partners. DT is the general partner and HC is the limited...
DT and HC are equal partners. DT is the general partner and HC is the limited partner. On January 1, 20xx, each had an adjusted basis in the Politics Partnership of $325,000. During 20xx, the partnership borrowed $40,000 on a recourse basis. In 20xx, the partnership had an operating loss of $675,000. What is the basis of each partner's interest at the end of 20xx? What is the loss for each partner?
At the beginning of the year, Elsie’s basis in the E&G Partnership interest is $80,000. She...
At the beginning of the year, Elsie’s basis in the E&G Partnership interest is $80,000. She receives a proportionate current (nonliquidating) distribution from the partnership consisting of $20,000 of cash, unrealized accounts receivable (basis of $0, fair market value $40,000), and land (basis of $20,000, fair market value of $50,000). After the distribution, Elsie’s bases in the accounts receivable, land, and partnership interest are: a. $0; $30,000; and $50,000. b. $0; $50,000; and $30,000. c. $40,000; $30,000; and $10,000. d....
On March 1, 2019, George and James form the GJ General Partnership in which they will...
On March 1, 2019, George and James form the GJ General Partnership in which they will share profits and losses equally. George contributes $600,000 in cash and James contributes land with an adjusted basis of $400,000 and a fair market value of $750,000. The land is subject to a qualified nonrecourse mortgage of $150,000. Required: How much gain or loss will George, James and the partnership recognize upon the formation of the partnership? Determine each partner’s basis in his partnership...
On March 1, 2019, George and James form the GJ General Partnership in which they will...
On March 1, 2019, George and James form the GJ General Partnership in which they will share profits and losses equally. George contributes $600,000 in cash and James contributes land with an adjusted basis of $400,000 and a fair market value of $750,000. The land is subject to a qualified nonrecourse mortgage of $150,000. Required: a.   How much gain or loss will George, James and the partnership recognize upon the formation of the partnership? b.   Determine each partner’s basis in...
Tom is a partner in TXY partnership. His adjusted basis in the partnership is $30,000. During...
Tom is a partner in TXY partnership. His adjusted basis in the partnership is $30,000. During the year, he receives the following distributions:                                                             AB                              FMV Cash                                                    $25,000                       $25,000 Property                                              $25,000                       $50,000. These are non-liquidating, proportionate, pro-rata distributions. a. What gain, if any, must Tom recognize on these distributions? b. What is Tom’s basis in the property?
George is a limited partner in the GLH Partnership. His outside basis is $40,000 before considering...
George is a limited partner in the GLH Partnership. His outside basis is $40,000 before considering the current year items, and includes a $10,000 recourse debt share and a $20,000 nonrecourse debt share. The nonrecourse debt is qualified nonrecourse financing. GLH reported a $200,000 loss for the year, of which George’s 40% share is $80,000. George has passive activity income of $50,000 from another activity (not eligible for the special real estate deduction). How much of the $80,000 loss can...
Partners A and B form a partnership where each receive a 50% interest in capital and...
Partners A and B form a partnership where each receive a 50% interest in capital and profits. Partner A contributes cash of $25,000 and land valued at $25,000. Partner A has a basis in the land of $20,000 and has held it for two years. Partner B contributes equipment (with a basis to B of $15,000 and a fair market value of $30,000) and inventory (with a basis to B of $10,000 and a fair market value of $20,000). Partner...