Question

Daniel acquires a 30% interest in the PPZ Partnership from Paolo, an existing partner for $43,000 of cash. The PPZ Partnership has borrowed $14,000 of recourse liabilities as of the date Daniel bought the interest. What is Daniel's basis in his partnership interest?

a. $47,200
b. $14,000
c. $57,000
d. $52.800

Answer 1

The right answer is a.

Step-by-step explanation:

In order to calculate Daniel's basis in his partnership interest, first we have to calculate daniel share of the partnership liabilities.

According to the details, Daniel acquires a 30% interest in the PPZ Partnership from Paolo, and The PPZ Partnership has borrowed $14,000 of recourse liabilities as of the date Daniel bought the interest, hence

daniel share of the partnership liabilities = 14,000 * 30% = $4,200

Hence, Daniel's basis in his partnership interest= 43,000 + 4,200 = $47,200