Question

Nichole owns a 50% interest in partnership J&K. She contributed a computer system with a FMV of $15,000 and an adjusted basis of $10,00U tU un partnership. Neither Nichole nor the partnership recognized any gain when the property was contributed. Which of the following is true regarding dhe partnership's basis in the computer system and Nichole's outside basis? O Partnership's basis in computer system - $10,000, Nichole's outside basis - increases by $10,000. Partnership's basis in computer system - $10,000, Nichole's outside basis - increases by $15,000. Partnership's basis in computer system - $15,000, Nichole's outside basis - increases by $10,000. Partnership's basis in computer system - $15,000, Nichole's outside basis - increases by $15,000.

Answer 1

Answer 1)

option (a) partnership basis in computer system- $10.000. nichole's outside basis-increases by $10.000

Fair market value is not considered because of neither nichole nor the partnership recognized any gain when the property was contributed.

Answer 2)

option d). ie., Allowable loss =$34,000 and adjusted basis =$1,000.

Increase in recourse liabilities is to be reduced from the partnership basis, in this case the increase in recourse liabilities is $30,000. Share of Anne is 50%. Hence, it is $30,000*50% =$15,000.

Given adjusted basis in this case =$20,000.

Current year loss =$68,000.

Share of Annies loss =$68,000*50%

=$34,000.

Adjusted basis = Year beginning basis+ share in recourse liabilities.- Loss for the current year

=$20,000+$30,000*50%

=$35,000.

Adjustement due to increase in recourse liabilities after loss =$35,000 -$34,000

=$1,000.

Therefore, answer is option 4. ie., Allowable loss =$34,000 and adjusted basis =$1,000.