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:

Swan-Neck Deformities

A finger deformity characterized by hyperextension of the proximal interphalangeal joint and flexion of the distal interphalangeal joint, often seen in rheumatoid arthritis.

Bouchard Nodules

Hard, bony outgrowths or nodules located on the proximal interphalangeal joints, often associated with osteoarthritis.

Heberden Nodes

Hard or bony swellings that can form on the distal interphalangeal joints, commonly associated with osteoarthritis.

Dupuytren Contractures

A condition where the fingers bend towards the palm and cannot be fully extended, due to thickening and shortening of the palmar fascia.