[Anonymous]

On June 1, 2010, Steve Maslan received a 20% capital interest in Gress Associates, a partnership, in return for services rendered plus a contribution of assets with a basis to Maslan of $15,000 and a fair market value of $20,000. The fair market value of Maslan’s 20% interest was $38,000. How much is Maslan’s basis for his interest in Gress?

A. $15,000

B. $20,000

C. $33,000

D. $38,000

Correct answer is C.

Really tricky, I quite don’t get it…still:(

[Anonymous]

20% interest = $38,000 – FMV of Assets given to partnership is $ 20,000. Making the FMV of services the difference…$18,000.

Masla's Bais = Adj Basis of Asstes + FMV of Services = $15,000 + 18,000 = $33,000.

Hope it helps.

[Anonymous]

Gotta admit, you guys pick wonderful questions. I'm almost done cleaning out Gleim's tax MCQ test bank and have not encountered a question like this.

bakerslky hit the nail on the head. When you contribute services, your basis is the FMV of the interest you receive for that service. The FMV for the service is $18,000 because the other $20,000 was the FMV of the property. So, his basis for the service is $18,000.

When you contribute assets in a partnership, your basis in that asset becomes your basis in the partnership. The basis of the asset is $15,000.

$18,000 + 15,000= $33,000

See how simple REG is?? It's a joke, isn't it? 😉

[Anonymous]

I did all the Becker MCQs multiple times and never encountered question like this…not even in the material. So glad I have Wiley, and you guys to explain it to me!!!

Here's another one that I was struggling with (got it now…what do you know? Reading helps:)

Accum E&P beg of '09: $40,000

Current E&P entire '09: (-$55,000)

Cash Dist. July 1 '09: $15,000

What's the amount of dividend?

Return of Stock basis?

Accum. E&P beg. of '10:

PS: Assume that an accurate determination of when the 2009 deficit occurred cannot be made.

[Anonymous]

The answer…..

Dividend- $12,500

Return of Stock Basis- $2,500

Accum. E&P beg. of '10: ($27,500)

Did I get it right? Am I ready for my exam next Saturday? 🙂

[mmen]

@CPAMAN

I think you are correct. gud luck on Saturday, I have my REG on next Monday.

This is my calculation

Prorate the current dividend as the cash distribution of 15000 is on July

(55000)/2= (27500)

Accum E&P beg of '09: $40,000-27500= 12500 Dividends

Reduced basis in stock: 2500

Accum. E&P beg. of '10:

40000-27500-12500-27500=(27500)

FAR: 5/31/11 Passed
AUD: 10/08/11 Passed
BEC: 01/07/12 Passed
REG: 11/27/11,2/27/12 5/12 passed
Got my license on 10/17/12........

[Anonymous]

That's what I got. You prorate the current E&P only when it's negative.

[lion_cpa]

@ CPAMan-Good Luck on Saturday! Knock that REG out the ball park….

[Anonymous]

YES @cpaman, you are right. I didn't get it at first b/c I didn't prorate it….you are good to go for the exam!:)

[Author]

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