Patrick Acquired a 50% Interest in a Partnership by Contributing

question 24

Multiple Choice

Patrick acquired a 50% interest in a partnership by contributing property that had an adjusted basis of $8,000 and a fair market value of $29,000. The property was subject to a liability of $22,000, which the partnership assumed for legitimate business purposes. Which of the following statements is correct?

• A)Patrick will be required to recognize a $3,000 gain due to the negative basis rules and will have a basis in his partnership interest of zero.
• B)Patrick will not be required to recognize a gain on his return and will have a basis in his partnership interest of negative $3,000.
• C)Patrick will be required to recognize a $21,000 gain due to the negative basis rules and will have a basis in his partnership interest of zero.
• D)Patrick will not be required to recognize a gain on his return but the realized gain will increase the basis of his partnership interest.

---

Definitions:

Payroll

The total amount of money that a company pays to its employees, including wages, salaries, bonuses, and deductions.

Ethical Behaviour

Acting in ways that are consistent with societal and professional standards of conduct, including honesty, fairness, and integrity.

Clothing Factory

A manufacturing facility specializing in the production of garments and textiles, often involving assembly line methods for mass production.

Social Factor

An element that influences societal behavior and interactions, including beliefs, values, culture, and economic status.