Question 1

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

Accepted Answer

Calculate Buyer's Share of Inside Basis. Subtract that from Buyer's Purchase Price (Outside Basis). The difference is the §743(b) adjustment.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Calculating adjustment on total partnership assets instead of buyer's share; ignoring the §754 election implication.

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

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