Adam contributes property with a fair market value of $3,000,000 and an adjusted basis of $1,200,000 to AP Partnership.Adam shares in $2,000,000 of partnership debt under the liability sharing rules,giving him an initial adjusted basis for his partnership interest of $3,200,000.One month after the contribution,Adam receives a cash distribution from the partnership of $3,000,000.Adam would not have contributed the property if the partnership had not contractually obligated itself to make the distribution.Assume Adam's share of partnership liabilities will not change as a result of this distribution.
Definitions:
Capital Expenditure
Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings, or equipment to improve long-term business operations.
Gain or Loss
The financial result from a transaction where the sale price is either higher (gain) or lower (loss) than the purchase price or the book value of an asset.
Disposed Asset
An asset that has been sold, discarded, or otherwise disposed of by a company.
Book Value
Book value is the net value of a company's assets found on its balance sheet, calculated by subtracting liabilities from the total assets.
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