Question

Fred contributes cash of $350,000 to Strumble Partnership for his 50% interest in the partnership. For his 50% interest Gary contibutes a building with a fairmarket value of $550,000 and a basis of $250,000. The building is subject to a mortgage of $200,000. Net income for Strumble for 2019 is $100,000, Strumble borrows an additional $50,000 during 2019 and makes a distribution to each partner of $20,000. Assuming that the partners share profits and losses equally what is Gary's basis in his partnership interest at the end of 2019.

Answer 1

Gary’s basis of interest at the end of 2019

Basis of property contributed to partnership      -        250,000

Less, mortgage on it                                           - 200,000    =   

Net Basis of property contributed                       -        50,000

Add , Gary’s share of debt from partnership     -        20000     

= 70,000

Less , share of profit                                            -          50,000    

Gary’s basis of interest at the end of 2019                    20,000