Question

Binita contributed property with a basis of $40,000 and a value of $50,000 to the BE Partnership in exchange for a 20% interest in partnership capital and profits. During the first year of partnership operations, BE had net taxable income of $30,000 and tax exempt interest income of $10,000. The partnership distributed $10,000 cash to Binita. Her adjusted basis (outside basis) for her partnership interest at year-end is:

Answer 1

$38,000

Step-by-step explanation:

The computation of the adjusted basis for her partnership interest at year end is shown below:

= Property contributed + share in income - cash received in distribution

= $40,000 + ($30,000 + $10,000) × 20% - $10,000

= $40,000 + $40,000 × 20% - $10,000

= $40,000 + $8,000 - $10,000

= $38,000

We simply applied the above formula so that the adjusted basis could come