Reference no: EM132842373

ABC Corporation and Billy form a general partnership. ABC contributes a building with a fair market value? of? $? 1,000,000 and a tax basis? of? $100,000 . The partnership also assumes a recourse liability? of? $400,000. ABC receives a? 60? % interest in partnership capital and profits. Billy contributes inventory with a fair market value? of? $400,000 and a tax basis of? ? $100,000 for a? 40? % interest in partnership capital and profits.

Problem 1: What tax basis do ABC and Billy have in their partnership interests??

A. ?ABC's basis is? $600,000 ,? Billy's basis is? $400,000
B. ?ABC's basis is? $340,000 ,? Billy's basis is? $260,000
C. ?ABC's basis is? $0, Billy's basis is? $260,000
D. ?ABC's basis is? $100,000 ,? Billy's basis is? $100,000.