Question

C, Anna, and Leo formed a calendar year partnership. Profits and losses are to be shared equally by the three partners. C contributed equipment that had an adjusted basis to him of $500,000 and a fair market value of $600,000. The partnership assumed C's debt of $180,000 on the equipment. What is the basis of C's partnership interest? What is the partnership's basis in the equipment?

Answer 1

When a partner contributes property to the partnership , the paertnership's basis in the contributed property is equal to its fair market value [ If no debts associated with the assets].If any debts associated with the assets then such amount subtracted from the FMV of the contributed property .

However , the outside basis of the partner increases only by the amount of the basis that partner had in the property .

Basis of C's partnership interest = adjusted basis of equipment - C's debt associated with equipment

Basis of C's partnership interest = $ 500,000 - $ 180,000 = $ 320,000

Partnership basis in the equipment = FMV of the equipment - debts associated with the equipment

Partnership basis = $ 600,000 - $ 180,000 = $ 420,000