RULE: Generally, no gain or loss is recognized on the contribution of
property to a partnership in return for a partnership interest. The basis of the
partnership interest is the basis of the property in the hands of the partner
upon contribution. The partnership takes on the contributor's basis of the
contributed property; however, if the fair market value of the property differs
from the basis, the amount of the unrealized gain or loss at the date of
contribution is specially allocated to the contributing partner upon the sale of
that contributed property.
Choice "a" is correct. Per the above rule, Marcus' basis in the partnership
immediately after formation is $50,000, which is Marcus' basis in the land at
the date of contribution.
Choice "d" is incorrect. Marcus has a basis in the partnership in the amount
of Marcus' basis in the property upon contribution.
Choice "b" is incorrect. Per the above rule, Marcus' basis in the partnership
immediately after formation is $50,000, which is Marcus' basis in the land at
the date of contribution.
Choice "c" is incorrect. Per the above rule, Marcus' basis in the partnership
immediately after formation is $50,000, which is Marcus' basis in the land at
the date of contribution. The basis is not the fair market value at the date of
contribution.
