Kathy Purchases a One-Third Interest in the KDP Partnership from Paul

question 2

Multiple Choice

Kathy purchases a one-third interest in the KDP Partnership from Paul for $60,000. Just prior to the sale, Paul's outside and inside bases in KDP are $48,000. KDP's balance sheet includes the following:
$$\begin{array} { | l | r | r | } \hline \text { Assets: } & \text { Basis } & \text { FMV } \\\hline \text { Cash } & \$ 48,000 & \$ 48,000 \\\text { Land held tor investment } & 96,000 & 132,000 \\\hline\end{array}$$ If KDP has a §754 election in place, what is Kathy's special basis adjustment?
$$\begin{array} { | l | l | r | } \hline \text { Liabilities and Capital: } & & \\\hline \text { Capital } & \text { Paul } & 48,000 \\\hline & \text { Kristi } & 48,000 \\\hline & \text { David } & 48,000 \\\hline\end{array}$$

• A) $0
• B) $36,000
• C) $12,000
• D)None of these is correct.

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Definitions:

Private Accounting

A field of accounting that involves working within a company to process financial transactions, manage financial records, and prepare internal financial reports.

Public Accounting

The field of accounting that involves providing assurance, tax, and consulting services to the public, typically performed by certified public accountants (CPAs).

Revenue Recognition

Revenue recognition is an accounting principle that outlines the specific conditions under which revenue is recognized or accounted for.

Guidelines

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