Ally, Nicole, and Jim form a general partnership. Ally acquires a 1/3rd general partnership interest in exchange for a contribution of property with a basis of $150,000 and a fair market value of $540,000, subject to a recourse liability of $180,000. Nicole and Jim each contribute $360,000 cash in exchange for their 1/3rd general partnership interest. Assume that each partner will be allocated 1/3rd of the liability under section 752 following the contribution and the partnership’s assumption of the debt. Determine each partner’s outside basis in the partnership. Prepare the partnership’s books following formation. AssetsBookTaxLiabilitiesBookTax CapitalBookTax

Explanation:To determine each partner's outside basis in the partnership and prepare the…

Answered: Ally, Nicole, and Jim form a general…

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter10: Partnerships: Formation, Operation, And Basis

Section: Chapter Questions

Problem 29P

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Ally, Nicole, and Jim form a general partnership. Ally acquires a 1/3^rd general partnership interest in exchange for a contribution of property with a basis of $150,000 and a fair market value of $540,000, subject to a recourse liability of $180,000. Nicole and Jim each contribute $360,000 cash in exchange for their 1/3^rd general partnership interest.

Assume that each partner will be allocated 1/3^rd of the liability under section 752 following the contribution and the partnership’s assumption of the debt. Determine each partner’s outside basis in the partnership.

Prepare the partnership’s books following formation.

Assets	Book	Tax	Liabilities	Book	Tax

			Capital	Book	Tax

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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