Sharon Contributed Property to the Newly Formed QRST Partnership

question 190

Multiple Choice

Sharon contributed property to the newly formed QRST Partnership. The property had a $100,000 adjusted basis to Sharon and a $160,000 fair market value on the contribution date. The property was also encumbered by a $90,000 nonrecourse debt, which was transferred to the partnership on that date. Sharon is treated as a general partner. She is allocated 30% of QRST's profits and 20% of QRST's losses. Sharon's basis in the partnership interest after the formation transaction is:

• A) $28,000.
• B) $37,000.
• C) $88,000.
• D) $118,000.
• E) $127,000.

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Definitions:

Compounded Quarterly

Involves calculating interest on an investment or loan every three months, then adding that interest to the principal amount; thus, the interest for the next period is calculated on the principal plus previously accumulated interest.

Monthly Payment

A specified amount of money paid at regular monthly intervals, often related to loans or leases.

Car

A wheeled motor vehicle used for transportation, typically designed to seat one to eight people.

Compounded Quarterly

Calculation of interest on an investment or loan on a quarterly basis, leading to interest being added to the principal, which then earns additional interest.