C is an equal partner in the ABC Partnership. The partnership has made no electi
ID: 2540174 • Letter: C
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?
A. $0
B. $30,000
C. $31,500
D. $90,000
Explanation / Answer
Answer
D.$90000
$82500 was the basis at the end of the year.
Since no section 754 election is in effect, E steps into the shoes of selling partner C, E takes a basis in the partnership Inventories.
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