Answered: Cindy has a $4,000 basis in the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Cindy has a $4,000 basis in the partnership. She receives (if it does not say liquidating, it is a current distribution) property with a $4,500 basis and FMV of $6,000. What is her basis?

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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Step 1 Explanation

Distribution other than in liquidation of a partner’s interest: The basis of property (Other than money) received by a partner in a distribution from a partnership, other than in liquidation of his entire interest, shall be adjusted to the partnership immediately before such distribution. However, the basis of the property to the partner shall not exceed the adjusted basis of the partner’s interest in the partnership.

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