Question

Following the sale by one of its partners of her interest in the partnership, Glendale Partnership is required to increase the basis of its assets under Code Sec. 743(b). The total Code Sec. 743(b) adjustment is $8,000. The purchasing partner's share of the partnership's assets is as follows:

Inventory $2,000 $5,000
Property 1 (Sec. 1231 asset) 10,000 25,000
Property 2 (Sec. 1231 asset) 20,000 10,000
$32,000 $40,000
How much of the basis adjustment should be allocated to the inventory?
a. $1,000.
b. $3,000.
c. zero.
d. none of these.

Answer 1

b. $3,000.

Step-by-step explanation:

The computation of the amount of the basis adjustment allocated to the inventory is shown below;

= $5,000 - $2,000

= $3,000

This $3,000 would represent the basis adjustment and the same would be allocated to the inventory

hence, the correct option is b.

And, the rest of the options would be incorrect