Edith Contributes Land Having $100,000 FMV and a $85,000 Adjusted

question 2210

Multiple Choice

Edith contributes land having $100,000 FMV and a $85,000 adjusted basis, which is subject to a $66,000 mortgage in exchange for a one- third interest in the EHK Partnership. The partnership owes no other liabilities. After the contribution, Kate, Edith, and Helen share profits and losses equally and each has a one- third interest in the partnership capital. Assume that Kate has a basis in her partnership interest of $50,000 before Edith's contribution to the partnership. The effect of Edith's contribution on partner Kate's basis is to

• A) increase Kate's basis to $77,000.
• B) increase Kate's basis to $72,000.
• C) decrease Kate's basis to $28,000.
• D) No effect on Kate's basis.

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Definitions:

Gasoline Fraction

A specific range of hydrocarbons derived from petroleum refining used primarily as fuel in internal combustion engines.

Crude Oil Refinement

The industrial process of converting crude oil into useful petroleum products such as gasoline, diesel, and jet fuels.

Kerosene

A flammable hydrocarbon liquid commonly used as a fuel in heating, jet engines, and lighting, extracted from petroleum.

Jet Fuel

A type of aviation fuel designed for use in aircraft powered by gas-turbine engines.