C is an equal partner in the ABC Partnership. The partnership has made no electi

Question

C is an equal partner in the ABC Partnership. The partnership has made no election under IRC Section 754. C sells her interest to E for its fair market value of $99,000 when her basis was $88,000. At year-end, the assets of the partnership are as follows:

                                              Basis                                        Market

Cash                                  $ 22,500                                      $ 22,500

Accounts receivable             45,000                                         45,000

Inventory                               90,000                                        94,500

Land                                     90,000                                       180,000

TOTAL                              $ 247,500                                     $ 342,000

Assuming that C's outside basis equaled the partnership's inside basis at the time of the sale, what is E's basis in the inventory at year end?

Explanation / Answer

Answer is $31,500

All are equal partners, Market value of inventory is 94,500 , so, 1/3 of inventory is $31,500

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