3000 c 0 d 9000 explanation choice a is correct harts

$3,000
c. $0
d
.
$9,000
Explanation
Choice "a" is correct. Hart's basis for the land is $6,000.
Rule: The basis of property received in a distribution, other than in liquidation of a partner's
interest, will ordinarily be the same as the basis in the hands of the partnership immediately prior
to distribution. However, in no case may the basis of property in the hands of the partner exceed
the basis of his partnership interest reduced by the amount of money distributed to him in the
same transaction.
Partnership interest adjusted prior to distribution
$ 30,000
Amount of cash distributed
(24,000)
Remaining basis after cash distribution
6,000
Distribution of land with basis of $9,000
(6,000)
Remaining partnership interest
$ 0
The partnership interest may not be reduced below zero. Therefore, the land has a basis of $6,000
in the hands of the partner.
Eng contributed the following assets to a partnership in exchange for a 50% interest in the
partnership's capital and profits:

Cash $50,000
Equipment:
Fair
market
value
35,000
Carrying
amount
(adjusted
basis)
25,000
The basis for Eng's interest in the partnership is:
a. $75,000
b
.
$42,500
c. $85,000
d
.
$37,500
Explanation
Choice "a" is correct. The basis for Eng's interest in the partnership is $75,000 computed as
follows:
Cash
$ 50,000
Adjusted basis of eqpt.
25,000
Total partnership interest basis
$ 75,000
Rule: In general, a partner's basis in his/her partnership interest will be the amount of cash
contributed plus the adjusted basis of any property contributed in exchange for the interest.
Choices "d", "b", and "c" are incorrect, per the above rule.
Under the Internal Revenue Code sections pertaining to partnerships, guaranteed payments are
payments to partners for:
a.
Sales of partners' assets to the partnership at guaranteed amounts regardless of market
values.
b
.
Timely payments of periodic interest on bona fide loans that are not treated as partners'
capital.

c. Services or the use of capital without regard to partnership income.
d
.
Payments of principal on secured notes honored at maturity.
Explanation
Choice "c" is correct. Under the Internal Revenue Code, guaranteed payments are payments to
partners for services rendered or the use of capital without regard to partnership income.
Choices "d", "b", and "a" are incorrect, per the above definition of a guaranteed payment.
The basis to a partner of property distributed "in kind" in complete liquidation of the partner's
interest is the:
a.
Adjusted basis of the partner's interest increased by any cash distributed to the partner in
the same transaction.
b
.
Fair market value of the property.
c. Adjusted basis of the property to the partnership.
d
.
Adjusted basis of the partner's interest reduced by any cash distributed to the partner in the
same transaction.
Explanation
Choice "d" is correct. Adjusted basis of the partner's interest reduced by any cash distributed to
the partner in the same transaction.