Sarah Contributed Fully Depreciated ($0 Basis) Property Valued at $50,000

question 38

Essay

Sarah contributed fully depreciated ($0 basis) property valued at $50,000 to the RSTU Partnership in exchange for a
25% interest in partnership capital and profits. During the first year of partnership operations, RSTU had net taxable income of $200,000 and tax-exempt income of $4,000. The partnership distributed $10,000 cash to Sarah. Her share of partnership recourse liabilities on the last day of the partnership year was $20,000. What is Sarah's adjusted basis (outside basis) for her partnership interest at the end of the tax year?

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Definitions:

Independent Variable

A factor or condition that is intentionally varied by the researcher to observe its impact on the dependent variable in an experiment.

Dependent Variable

In an experiment, it is the variable that is being tested and measured, expected to change as a result of manipulations to the independent variable.

Gustav Theodor Fechner

A German philosopher, physicist, and experimental psychologist, known as a founder of psychophysics, which quantifies the relationships between physical stimuli and the sensations and perceptions they affect.

Psychophysics

The branch of psychology that studies the relationships between physical stimuli and the sensations and perceptions they produce.