Marlena Contributes Property Having a $30,000 FMV and a $27,000

question 1059

Essay

Marlena contributes property having a $30,000 FMV and a $27,000 adjusted basis and also renders accounting services valued at $15,000 in exchange for a 30% interest in the capital and profits of the BBB partnership. LeBron contributes a building with a $100,000 FMV, an adjusted basis of $88,000, and subject to a mortgage of
$80,000 for a 40% interest in the capital and profits of the BBB partnership. The partnership assumes the mortgag Ty contributes cash of $60,000 for a 30% interest in the capital and profits of the BBB partnership.
a. What is each partner's respective basis in the partnership?
b. What are the current income tax consequences to each partner?
c. What is the partnership's basis in the assets transferred in by the partners?

---

Definitions:

Veto Power

The authority to reject or prohibit proposals or laws, often held by a president, governor, or other leader.

Separation of Powers

The division of a state's government into branches, each with separate, independent powers and responsibilities, to prevent abuse of power and to provide a system of checks and balances.

Checks and Balances

A system in government where different branches are empowered to prevent actions by other branches and are induced to share power, maintaining a balance.

Civil Liberties

Individual rights protected by law from unjust governmental or other interference.