In the Current Year, Derek Formed an Equal Partnership with Cody

question 12

Essay

In the current year, Derek formed an equal partnership with Cody. Derek contributed land with an adjusted basis of $110,000 and a fair market value of $200,000. Derek also contributed $50,000 cash to the partnership. Cody contributed land with an adjusted basis of $80,000 and a fair market value of $230,000. The land contributed by Derek was encumbered by a $60,000 nonrecourse debt. The land contributed by Cody was encumbered by $40,000 of nonrecourse debt. Assume the partners share debt equally. Immediately after the formation, what is the basis of Cody's partnership interest?

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Definitions:

Lowest Terms

The most reduced form of a fraction, where the numerator and denominator are at their smallest whole number ratio.

Fractions

Represents parts of a whole or a collection, expressed with different numbers on the top (numerator) and bottom (denominator) of a slash or line.

Whole Numbers

Non-negative integers, including zero, without any fractional or decimal parts.

Fractions

A mathematical expression representing the division of one quantity by another, typically written with a numerator above a denominator.