[Anonymous]

Delete post, I misread a question

[Anonymous]

You could add 1/4 ($6000) back after you take out the total mortgage of $24,000, but that would still give you a negative basis and you can't have a negative basis. The way Ninja shows problems like that is to take the value ($16,000) and subtract the percentage assumed by the partners ($24,000 * .75) = $-2,000, but you have to leave the basis at zero.

[JEjunkie]

You are correct that you have to add the partner's share of the liability. But, you must also first take that liability out of their basis. In this case you will calculate as follows:

16,000 (Adjusted basis of the land)

-24,000 (to deduct the amount of the mortgage since Strom is being relieved of this)

+6000 (to add back Strom's portion, 25% of the mortgage assumed by the partnership)

= – 2,000

Since you can't have a negative basis the answer is A. 0

[Author]

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