Cramer Corporation and Mr

question 73

Multiple Choice

Cramer Corporation and Mr. Chips formed a partnership in which Cramer is the general partner and Mr. Chips is a limited partner. Cramer contributed $500,000 cash, and Mr. Chips contributed a building with a $500,000 FMV and $300,000 tax basis. The partnership immediately borrowed $700,000 of recourse debt. What is Mr. Chips' tax basis in its partnership interest?

• A) $500,000
• B) $850,000
• C) $650,000
• D) $300,000

---

Definitions:

Blue-chip Stock

Stocks of large, reputable, and financially sound companies with a history of reliable growth and dividend payments.

Unknown Start-up

A newly founded company with an innovative business model or product that has not yet established a track record or gained widespread recognition.

Mental Accounting

A concept in behavioral economics where individuals categorize, monitor, and evaluate their financial activities distinctly, affecting their economic decisions and behavior.

Updating Beliefs

The process of revising one's beliefs or opinions in light of new evidence or information, fundamental in Bayesian inference and decision-making processes.