AmCo and BamCo Form the AB General Partnership at the Start

question 38

Multiple Choice

AmCo and BamCo form the AB General Partnership at the start of the current year with a land contribution by BamCo and a cash contribution by AmCo.BamCo's contributed property is subject to a recourse mortgage assumed by the partnership.BamCo has an 80% interest in AB's profits and losses.The land has been held by BamCo for the past 6 years as an investment.It will be used by AB as an operating asset in its parking lot business.Which of the following statements is correct? B

• A)Immediately after formation, AmCo's basis in the partnership equals the cash contributed by AmCo .
• B)Immediately after formation, AmCo 's basis in the partnership equals the cash AmCo contributed plus AmCo's share of the recourse debt contributed by BamCo.
• C)Because the debt is recourse, it can only be allocated to the general partners if one of them personally guarantees the debt.
• D)AB's basis in the land contributed by BamCo equals BamCo's basis in the land immediately before the contribution date, less the amount of the recourse debt assumed by the partnership.
• E)None of the above.

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Definitions:

Organic Material

Matter derived from living organisms, including plants, animals, and their byproducts, which can decompose into soil.

Calcite

A carbonate mineral and the most stable polymorph of calcium carbonate (CaCO3), commonly found in sedimentary rocks.

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A large, relatively arid peninsula in Western Asia, bordered by the Red Sea, Arabian Sea, and Persian Gulf, consisting of several countries including Saudi Arabia.

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A type of fault in which one rock layer is pushed up and over another, often related to compressional tectonic forces.