Question

Jed Castanza transfers $90,000 of cash to the JN partnership for a 60 percent interest in the JN partnership. Ned transfers a building with an adjusted basis of $30,000 and a fair market value of $100,000, subject to a debt of $40,000 that the partnership assumes, in exchange for a 40 percent interest in the JN partnership. Determine each partner’s adjusted basis in his partnership interest. Does either partner recognize any gain on the transfer to the partnership

Answer 1

Their basis will be 90,000 for Mr Castanza

and 60,000 for Ned

Also Ned will recognize a capital gain for 70,000 when performing the transfer of the property. As his adjusted basis is 30,000 while the property value is 100,000

Step-by-step explanation:

Mr Castanza

90,000 = 60%

Ned

100,000 - 40,000 = 60,000 = 40%

Total capital

90,000 + 60,000 = 150,000 = 100%

Check for difference:

90,000/150,000 x 60% = 90,000

60,000/150,000 x 40% = 60,000

Their basis will be 90,000 for Mr Castanza

and 60,000 for Ned

Also Ned will recognize a capital gain for 70,000 when performing the transfer of the property. As his adjustedbasis is 30,000 while the property value is 100,000