Rashad Contributes a Machine Having a Basis of $30,000 and an FMV

question 69

Multiple Choice

Rashad contributes a machine having a basis of $30,000 and an FMV of $25,000 to a partnership in exchange for a 20% interest in partnership capital, profits, and losses. Prior to the contribution, the partnership had recourse liabilities of $20,000. The partnership assumes a $20,000 recourse liability that is owed by Rashad on the machine. Partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses. Rashad's basis in his partnership interest is

• A) $22,000.
• B) $34,000.
• C) $18,000.
• D) $11,000.

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Definitions:

Comparative Advantage

The ability of an individual, company, or country to produce a good or service at a lower opportunity cost than its competitors.

Transaction

An exchange or transfer of goods, services, or funds between two or more parties.

Gain

An increase in wealth, resources, or advantage, often observed in financial contexts such as investment returns.

Comparative Advantage

The ability of a country, individual, company, or region to produce a good or service at a lower opportunity cost than a competitor, leading to more efficient international trade and allocation of resources.