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Donald gets a 15% share of a partnership in exchange for contributing a piece of land...

Donald gets a 15% share of a partnership in exchange for contributing a piece of land with a FMV of $50,000. The partnership takes on $10,000 of liabilities that Donald has related to buying the land, and the land has a $20,000 basis to the partnership. Prior to his contribution, the partnership had $5,000 in liabilities.

Show the steps to arrive at Donald's basis in the partnership, and explain your reasoning.

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Answer #1

ANSWER --- Donald's Interest -- $12250

EXPLANATION ---- Steps taken to arrive at Donald's basis --

Beginning basis (carryover from land) $20,000
Minus: liability assumed by other partners (8,500)
Plus: 15% liability assumed by Donald 750
Donald's basis $12250

Now we can see that Donald has taken partnership share of 15% by contributing land basis $20,000. Therefore we added the subsequent liability which Donald should take and deduct the liability acquired by other partner in land obligations due so we arrive at Donald's partnership basis which is $12250.

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