Julie and Kate form an equal partnership during the current year. Julie contributes cash of $200,000, and Kate contributes property (adjusted basis of $90,000, fair market value of $260,000) subject to a nonrecourse liability of
$60,000. As a result of these transactions, Kate has a basis in her partnership interest of $120,000.

Question

Quizplus · Accepted Answer

Kate's basis in her partnership interest would be calculated as her adjusted basis in the contributed property ($90,000) plus her share of the liability ($30,000, assuming the liability is shared equally), totaling $120,000. However, to find her correct basis, you must subtract the liability she is relieved of ($60,000), resulting in a basis of $60,000, not $120,000.

Julie and Kate Form an Equal Partnership During the Current