On July 1, Alexandra contributes business equipment (which she had purchased two years ago) having a $45,000 FMV and a $40,000 adjusted basis to the AX Partnership in exchange for a 25% interest in the capital and profits. The basis of Alexandra's partnership interest is
A) $5,000.
B) $40,000.
C) $45,000.
D) None of the above.
B) $40,000.
Her partnership basis will have a substituted basis (i.e., same basis as the transferred property) because no gain is recognized on the transaction.
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