Alicia and Barry Form the AB Partnership at the Start

question 39

Multiple Choice

Alicia and Barry form the AB Partnership at the start of the current year with a land contribution by Barry and a cash contribution by Alicia.Barry's contributed property is subject to a recourse mortgage assumed by the partnership.Barry has an 80% interest in AB's profits and losses.The land has been held by Barry 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?

• A)Immediately after formation, Alicia's basis in the partnership equals the cash contributed by Alicia.
• B)Immediately after formation, Alicia's basis in the partnership equals the cash she contributed plus her share of the recourse debt contributed by Barry.
• C)Because the debt is recourse, the constructive liquidation scenario is not applicable for determining the allocation of debt to the partners.
• D)AB's basis in the land contributed by Barry equals Barry'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:

Evolutionary Advantage

A trait that increases an organism's likelihood of survival and reproduction in a particular environment.

Haploid

Referring to a cell or nucleus containing a single set of unpaired chromosomes, as seen in gametes (sperm and egg cells) of sexually reproducing organisms.

Meiosis

is a type of cell division that reduces the chromosome number by half, creating four haploid cells, each genetically distinct from the parent cell.

Chromosome Segregation

The process during cell division in which chromosomes are equally distributed into two new nuclei, ensuring each daughter cell receives an identical set of chromosomes.