Patrick Acquired a 50% Interest in a Partnership by Contributing

question 112

Multiple Choice

Patrick acquired a 50% interest in a partnership by contributing property that had an adjusted basis of $8,000 and a fair market value of $29,000.The property was subject to a liability of $22,000,which the partnership assumed for legitimate business purposes.Which of the following statements is correct?

• A)Patrick will be required to recognize a $3,000 gain due to the negative basis rules and will have a basis in his partnership interest of zero.
• B)Patrick will not be required to recognize a gain on his return and will have a basis in his partnership interest of negative $3,000.
• C)Patrick will be required to recognize a $21,000 gain due to the negative basis rules and will have a basis in his partnership interest of zero.
• D)Patrick will be required to recognize a $14,000 gain due to the negative basis rules and will have a basis in his partnership interest of zero.

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Definitions:

Mutual Understanding

A state of agreement or empathy between two or more parties, where each party comprehends the others' perspectives or intentions.

Compromise

A method of conflict resolution where two or more parties each concede some of their demands to reach a mutually acceptable agreement.

Critical Reflection

The process of analyzing and evaluating one's thoughts, actions, and experiences to gain deeper understanding and improve future outcomes.

Character Strengths

Positive traits or qualities that are considered inherent in individuals and contribute to their overall well-being and ability to achieve personal goals.