On January 1 of the current year, Anna and Jason form an equal partnership. Anna contributes $50,000 cash and a parcel of land (adjusted basis of $100,000; fair market value of $150,000) in exchange for her interest in the partnership. Jason contributes property (adjusted basis of $180,000; fair market value of $200,000) in exchange for his partnership interest. Which of the following statements is true concerning the income tax results of this partnership formation?A. Jason recognizes a $20,000 gain on his property transfer. B. Jason has a $200,000 tax basis for his partnership interest. C. Anna has a $150,000 tax basis for her partnership interest. D. The partnership has a $150,000 adjusted basis in the land contributed by Anna. E. None of the statements is true.

C. Anna has a $150,000 tax basis for her partnership interest.

Explanation:

Anna will have a tax basis that isade up of the $50,000 cash and the $100,000 adjusted land basis (that is $150,000).

Property contributions for Anna is the adjusted land of $100,000 and for Jason his property contribution is $180,000. They will have no gain or loss as a result of their property contributions.

Note the contributions are tax free.

Substitution basis of rule 722 states that the partner's interest is equal to the property basis contributed by them.

Also the carryover rule 723 applies and it states that the value of contributed property is it's adjusted value.

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explanation:

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