When Kevin and Marshall formed the equal KM LLC, the fair market values of their interests were each $100,000. Kevin contributed $60,000 cash, equipment with a basis of $0 and a fair market value of $10,000, and a small parcel of land in which he had a basis of $50,000 and that was valued at $30,000. Marshall contributed receivable that was valued at $100,000 and in which his basis was $0. Kevin has a basis in his partnership interest of $110,000 and Marshall’s basis is $0.
Answer the following statement true (T) or false (F)
True
Rationale: Kevin's $110,000 basis is a substituted basis equal to the sum of the bases in the properties he contributed: $60,000 cash, plus $0 equipment, plus $50,000 land. Marshall's substituted basis of $0 equals his basis in the contributed account receivable.
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