Taxation of business entities.

Taxation of Business Entities Question!?

  • Palmer contributes property with a fair market value of $4,000,000 and an adjusted basis of $3,000,000 to AP Partnership. Palmer shares in $1,000,000 of partnership debt under the ...show more

  • Answer:

    it would appear the $2M distribution wiped out his share of the $1M liability and the other $1M reduced his basis of the partnership to $2M now(adj basis $3M, $1M payment to him, reduces his capital to $2M) he is merely being repaid his capital, how is there any gain? is his contribution the only basis of the partnership?

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