Question

AB Corporation and YZ Corporation formed a partnership to construct a shopping mall, AB contributed $641,000 ach and Y7 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). a. Compute each partner's initial basis in its partnership interest, assuming that both AB and YZ are general partners b. 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

REQUIRED A :
AB's initial basis	$ 801,250
YZ's initial basis	$ 731,250

REQUIRED B :
AB's initial basis	$ 961,500
YZ's initial basis	$ 571,000

EXPLANATION :

A)	Compute each partner's initial basis in its partnership interest ,Assumed that both AB and YZ are general partners:
	Particulars	Amount ($)
	AB's cash contribution	$ 641,000
	AB's share of recourse debt {$ 320,500/2}	$ 160,250
	( i.e 50% share of each partner )
	AB's initial basis in its partnership interest	$ 801,250,
	Particulars	Amount ($)
	YZ's land contribution (basis )	$ 571,000
	YZ's share of recourse debt {$ 320,500/2}	$ 160,250
	( i.e 50% share of each partner )
	YZ's initial basis in its partnership interest	$ 731,250
B)	Compute each partner's initial basis in its partnership interest ,Assumed that AB is a general partner and YZ is a limited partner:
	Here, YZ is a limited partner , so, YZ is not responsible for any of partnership recourse debt .
	AB is a general partner , so, AB is responsible for repayment (i.e unlimited liability) and include
	entirely partnership recourse debt
	Particulars	Amount ($)
	AB's cash contribution	$ 641,000
	AB's share of recourse debt (Entirely)	$ 320,500
	AB's initial basis in its partnership interest	$ 961,500
	Particulars	Amount ($)
	YZ's land contribution (basis )	$ 571,000
	YZ's share of recourse debt (because of limited partner)	$ 0
	YZ's initial basis in its partnership interest	$ 571,000