Final answer:
In the context of a partnership formation, the initial tax basis includes the value of contributions made by each partner including cash, property, and their share of any assumed liabilities.
Step-by-step explanation:
The question pertains to the initial tax basis calculation for an entity entering a partnership in the context of tax law and accounting practices. When AmCo and BamCo form the AB General Partnership, the initial basis of each partner's interest in the partnership is determined by the value of what they contribute. In this scenario, AmCo's basis would include the cash contribution they made.
For BamCo, the basis of the land contributed is generally the adjusted basis that BamCo had in the land right before the contribution, decreased by any liabilities the partnership assumed that BamCo was personally responsible for (recourse mortgage), but BamCo's initial basis would also include BamCo's share of the recourse liability the partnership assumed. The resulting initial basis for each partner would potentially affect various tax outcomes for the partners, including depreciation, amortization, and recognition of gain or loss on future partnership transactions.