Question

AB Corporation and YZ Corporation formed a partnership to construct a shopping mall. AB contributed $641,000 cash, and YZ contributed land ($641,000 FMV and $571,000 basis) in exchange for a 50 percent interest in ABYZ Partnership. Immediately after its formation, ABYZ borrowed $320,500 from a local bank. The debt is recourse (unsecured by any specific partnership asset). 1. Compute each partner's initial basis in its partnership interest, assuming that both AB and YZ are general partners. ). Compute each partner's initial basis in its partnership interest, assuming that AB is a general partner, and YZ is a limited partner. Complete this question by entering your answers in the tabs below. Required A Required B Compute each partner's initial basis in its partnership interest, assuming that both AB and YZ are general partners. AB's initial basis YZ's initial basis

Answer 1

Initial basis of the partners in a partnership depends on type of ownership they have in the
partnership.
(i) In case of general partner, initial basis would depend on the value of initial investment in
the partnership as well as their share in the partnership's liabilities.
(ii) In case of limited partner,initial basis is solely limited to the assets contributed to the
partnership by the limited partner.
a.
Since, both AB and YZ are general partners,the initial basis shall be their interest in the
partnership
AB's initial basis	$641,000
YZ's initial basis	$641,000
b.
Since, YZ is a limited partner,his initial basis would be restricted to the value of the asset
contributed by him to the partnership.AB being a general partner,his initial basis would be
his share in the partnership's liabilities
AB's initial basis	$641,000
YZ's initial basis	$571,000