Erika contributed property with a basis of $30,000 and a value of $40,000 to the BE Partnership in exchange for a 40% interest in partnership capital and profits. During the first year of partnership operations, BE had net taxable income of $60,000. The partnership distributed $10,000 cash to Erika. Erika's adjusted basis (outside basis) for her partnership interest at year-end is:
A) $24,000.
B) $30,000.
C) $44,000.
D) $54,000.
E) None of the above.

Question

Quizplus · Accepted Answer

To calculate Erika's adjusted basis, we need to take into account her initial basis, her share of partnership income, and any distributions received.

Initial basis = $30,000

Share of partnership income = 40% x $60,000 = $24,000

Total basis before distribution = $30,000 + $24,000 = $54,000

Distribution received = $10,000

Total basis after distribution = $54,000 - $10,000 = $44,000

Therefore, Erika's adjusted basis at year-end is $44,000. So, the correct answer is C.

Erika Contributed Property with a Basis of $30,000 and a Value