Choice "B" is correct. Pert's adjusted basis in the partnership is equal to the $12,000 adjusted basis of the land he contributed to the partnership less the 50% allocable percentage of the $4,000 mortgage assumed by the other partners.
| |
|---|
| Land basis | $ 12,000 |
| 50%* × $4,000 mortgage | (2,000) |
| Pert's basis in the partnership | $ 10,000 |
* Other partners' percentage ownershipChoice "d" is incorrect. The amount of the liability assumed by the other partners must be subtracted from the adjusted basis.
Choice "a" is incorrect. Use the land's $12,000 adjusted basis as the starting point, not its $20,000 fair market value.
Choice "c" is incorrect. Use the land's $12,000 adjusted basis as the starting point, not its $20,000 fair market value, and subtract the percentage of the liability assumed by the other partners.
