Jane contributes land with an FMV of $100,000 and a basis of $80,000 to the Green Partnership in exchange for a 25% partnership interest. The partnership assumes the $40,000 mortgage on the land. Mary has a 25% share of partnership liabilities. The Green Partnership has $8,000 in liabilities immediately before Jane's contribution. What is Jane's basis in her partnership interest?
What will be an ideal response?
Basis of contributed property $80,000
Plus: Jane's share of existing partnership liabilities ($8,000 × 0.25) 2,000
Minus: Jane's liabilities assumed by the other partners ($40,000 × 0.75) (30,000)
Jane's basis in her partnership interest $52,000
Jane does recognize any gain on the partnership's assumption of her liability because the deemed cash distribution from the assumption of her $30,000 in liabilities by the partnership does not exceed her $82,000 basis in the partnership interest immediately preceding the fictional distribution.
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