Question

Jones and Curry formed Major Partnership as equal partners by contributing the assets below:

Asset Adj Basis FMV

Jones Cash $45,000 $45,000

Curry Land $30,000 $57,000

The land was held by Curry as a capital asset, subject to a $12,000 mortgage, that was assumed by Major.

What was Curry's initial basis in the partnership interest?
1) $45,000
2) $30,000
3) $24,000
4) $18,000

Answer 1

Curry's initial basis in the partnership interest is $18,000.

Step-by-step explanation:

To determine Curry's initial basis in the partnership interest, we need to consider both the adjusted basis and fair market value of the asset contributed. In this case, Curry contributed land with an adjusted basis of $30,000 and a fair market value (FMV) of $57,000. However, we also need to account for the mortgage of $12,000 that was assumed by the partnership. Therefore, Curry's initial basis in the partnership interest would be the adjusted basis of the contributed asset minus the assumed mortgage: $30,000 - $12,000 = $18,000.