Question

On June 1 of the current tax year, Elisha and Ezra (who are equal partners) contribute...

On June 1 of the current tax year, Elisha and Ezra (who are equal partners) contribute property to form the Double E Partnership. Elisha contributes cash of $200,000. Ezra contributes a building and land with an adjusted basis and fair market value of $340,000, subject to a liability of $140,000. The partnership borrows $20,000 to finance construction of a parking lot in front of the building. At the end of the first year (December 31), the accrual basis partnership owes $8,200 in trade accounts payable to various creditors. The partnership reported net income $30,000 for the year that they share equally. Assume that Elisha and Ezra share equally in partnership liabilities. How much is Elisha’s basis in the partnership interest on December 31? Ezra’s?

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Answer #1

Elisha's basis in partnership :

Cash contribution $200,000

Add:Share of the liability on the contributed land. $70,000

Share of the construction debt $10,000

Share of the accounts payable debt. $4,100

Share of partnerships taxable income $15,000

Elisha’s basis in the partnership on December 30. $299,100

Ezra's basis:

Land and building. $340,000

Less:Debt assumed by the partnership ($140,000)

Add: Share of liability on contributed land $70,000

Share of construction debt $10,000

Share of accounts payable debt $4,100

Share of partnerships taxable income. $15,000

Ezra's basis in partnership on December 30. $299,100

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