Question

1. Sarah contributes a building with an adjusted basis of $80,000 to a partnership for a 10% interest in the partnership.  The fair market value of the building is $100,000 on the date of the contribution. What is Sarah's basis in the partnership immediately after the contribution?

	a. $100,000 b. $8,000 c. $10,000 d. $80,000 2. Erin and Rebecca enter into a partnership to provide tutoring services. They are equal partners in the partnership. Erin contributes office furniture in the amount of $15,000 basis and $20,000 fair market value. Subsequent to the formation of the partnership, the partnership incurred 2,000 of liabilities and the partnership income was 12,000. What is Erin's basis in the partnership at year-end? a. $15,000 b. $27,000 c. $20,000 d. 21,000 3. Will and Grace form a partnership. Each is a 50% partner. Will contributes $40,000 of cash and Grace contributes $60,000 of unrealized accounts receivable from her cash basis sole proprietorship. What is Will's basis in the partnership? a. $30,000 b. $40,000 c. 20,000 d. $60,000 4. R. Fed Corporation owns 25% of Nadal Company. In 2019, R. Fed Corporation receives a dividend in the amount of $40,000. How much of the dividend income must be EXCLUDED in R. Fed Corporations 2019 income? a. $40,000 b. $0 c. $26,000 d. $10,000 5. Penn, Inc. was formed in 2016. It was profitable until 2019. In 2019, Penn has a Net Operating Loss of $15,000. In 2020, Penn had taxable income of $10,000 before taking into account the 2019 Net Operating Loss. What is Penn's 2019 Net Operating Loss Carryforward after the 2020 tax return? a. $7000 b. 15,000. c. 2,000 d. 8,000 6 .Sunny Days Corporation was formed in 2015. It had net income in each year of operation. The company had the following net capital gains and losses: 2017 $    1,000 Gain 2018 $    5,000 Gain 2019 $(10,000) Loss How should the corporation report the 10,000 capital loss in 2019? a. Capital losses are not allowed b. Report 4,000 of loss in 2019. c. Carryforward $4,000 of loss d. Report the full amount of the loss (10,000) in 2019.

Answer 1

Question 1:-

The correct answer is Option D - $80,000. Generally, whenever a partner contributes assets to a partnership, their basis is limited to the adjusted basis of the property prior to the date of contribution. The adjusted basis of Sarah's property is $80,000 and hence this would remain the as Sarah's adjusted basis in the partnership immediately after contribution.

Option A is incorrect. The fair market value of the property is not considered in calculating the partner's basis in partnership. The partner's basis in partnership is limited to the adjusted basis of the property/asset transferred.

Option B is incorrect. The $8,000 is calculated as 10% of Sarah's adjusted basis in the property and it is incorrect because Sarah's basis in property is the adjusted basis of the actual property transferred.

Option C is incorrect. The $10,000 is calculated as 10% of Sarah's fair value in the property and it is incorrect because Sarah's basis in property is the adjusted basis of the actual property transferred.

Kindly request you to post the other questions separately so that we can answer them as well. Please let me know if you have any questions via comments and all the best :)