7 Bob contributed to the AlphaBeta Partnership a general par

7.         Bob contributed to the AlphaBeta Partnership, a general partnership, a building with an adjusted basis to Bob of $50,000 and a fair market value of $150,000 that was subject to a mortgage of $120,000 in exchange for a 50 percent interest in the Alpha Partnership. Alpha will assume the mortgage on the building. At the same time, Al contributed to AlphaBeta Partnership cash of $30,000 in exchange for the other 50 percent interest in the AlphaBeta Partnership. Which of the following Code Sections is or are relevant to the determination of Bob’s basis in his partnership interest upon completion of this transaction?

a.          Only Code Section 722.

b.         Only Code Section 1012(a).

c.         Only Code Sections 1012(a) and 722.

d.        Code Sections 1012(a), 722, and 705(a).

Solution

Solution: Only Code Section 722

Explanation: US code section 722 deals with basis of contributing partners interest and in the given case the adjusted basis of such property to the contributing partner at the time of contribution has enhanced with the amount of the gain recognized under US code section 722