(TCO 7) In the current year, Daisy formed an equal partnership with Peter. Daisy contributed land with an
adjusted basis of $15,000 and a fair market value of $75,000. Daisy also contributed $25,000 cash to the
partnership. Peter contributed land with an adjusted basis of $50,000 and a fair market value of $90,000.
The land contributed by Daisy was encumbered by a $10,000 nonrecourse debt. Assume the partners
share debt equally. Immediately after the formation, the basis of Peter’s partnership interest is:
None of the above.
Peter’s basis is determined as follows:
Basis of land.
Share of debt.
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(TCO 7) Which of the following decreases a partner’s basis in his or her partnership interest:
Exempt income items.
Taxable income items.
An increase in a partner’s share of debt
None of the above.
The partner’s basis in his or her partnership interest is increased by items of
income, an increase in a partners share of debt, and the excess of depletion deductions over the adjusted
basis of property subject to depletion. It is decreased by losses, a decrease in a partners share of debt,
the special loss deduction for oil and gas wells, and nondeductible items not chargeable to a capital
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(TCO 7) On January 1 of the current year, Rachel and Julio form an equal partnership. Rachel makes a
cash contribution of $80,000 and a property contribution (adjusted basis of $110,000; fair market value of
$80,000) in exchange for her interest in the partnership. Julio contributes property (adjusted basis of
$120,000; fair market value of $160,000) in exchange for his partnership interest. Which of the following
statements is true concerning the income tax results of this partnership formation?
Rachel has a $160,000 tax basis for her partnership interest.
The partnership has an $80,000 adjusted basis in the property contributed by