Question

Lee, Brad, and Rick form the LBR Partnership on January 1 of the current year. In return for a 25% interest, Lee transfers property (basis of $15,000, fair market value of $17,500) subject to a nonrecourse liability of $10,000. The liability is assumed by the partnership. Brad transfers property (basis of $16,000, fair market value of $7,500) for a 25% interest, and Rick transfers cash of $15,000 for the remaining 50% interest.

Required:
a. After the contribution, Lee's basis in his interest in the partnership is $_________
b. Brad's basis in his interest in the partnership is $__________
c. Rick's basis in his interest in the partnership is $________

Answer 1

Answer and Explanation:

The computation of the partners basis is given below:

a. Lee basis

= ($15,000) - ($10,000 ÷ 4 × 3)

= $7,500

b. Brad basis

= $16,000 + (10,000 × 25%)

= $18,500

c. Rick basis is

= $15,000 + ($10,000 × 50%)

= $20,000

In this way each partners basis should represent their interest in the partnership

The same is to be considered