Question

On june 1 of the current year, patti contributes equipment with a $45,300 basis and a $36,000 fmv in exchange for a partnership interest. she purchased the equipment five years ago.

what is patti’s basis in her partnership interest?

Answer 1

Patti's basis in her partnership interest will be the same as her basis in the equipment she contributed, which is $45,300. The FMV of the equipment is not relevant in this basis determination unless a specific tax election is made, which doesn't apply here.

Step-by-step explanation:

When Patti contributes equipment to a partnership in exchange for an interest in the partnership, the basis of her partnership interest is generally the same as the basis of the equipment contributed. Since Patti's basis in the equipment is $45,300, this will also be her initial basis in the partnership interest.

The fact that the fair market value (FMV) of the equipment at the time of the contribution is $36,000 is not relevant in determining her basis in the partnership interest unless the partnership has made a special election under section 754, which does not seem to be the case here. The equipment's depreciation or appreciation during the time Patti owned it prior to contributing it to the partnership does not affect her basis in the partnership interest either.

Therefore, the direct answer to the question is that Patti's basis in her partnership interest is $45,300, the same as her adjusted basis in the equipment contributed.