Question 1

Partner A sells their 1/3 interest in a partnership to Buyer B for $100,000. The partnership has assets with a basis of $150,000 and FMV of $300,000. A Section 754 election is in effect. What is the amount of the Section 743(b) basis adjustment allocated to Buyer B?

Accepted Answer

Calculate Transferee's Share of Inside Basis: $150,000 * 1/3 = $50,000. Adjustment = Purchase Price ($100,000) - Share of Inside Basis ($50,000) = $50,000.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Using the full FMV or basis instead of the partner's share.

Partner A sells their 1/3 interest in a partnership to Buyer B for $100,000. The partnership has assets with a basis of $150,000 and FMV of $300,000. A Section 754 election is in effect. What is the amount of the Section 743(b) basis adjustment allocated to Buyer B?

How to approach this question

Full Answer

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Practice the full CPA TCP Practice Exam 3

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