Partnership treatment of purchase of a partner's interest
Partnership with Partners A, B, and C. Ownership is 45%, 45%, and 10% respectively. The partnership owns a ski lodge that it uses on occasion and rents out at other times. Partners A and B pay Partner C $75,000 and purchase her share. Partners A and B are now 50%/50% owners of the partnership.
I assume that Partners A and B's capital account is increased by $37,500 each.
Two questions:
1. Does 10% of the underlying property have a step up in basis if Partner C recognizes gain on the sale?
2. Am I correct to assume that Partner C must recognize gain on the difference between $75,000 and the adjusted basis of her portion of the property?
How does the outside basis fit into this?
I assume that Partners A and B's capital account is increased by $37,500 each.
Two questions:
1. Does 10% of the underlying property have a step up in basis if Partner C recognizes gain on the sale?
2. Am I correct to assume that Partner C must recognize gain on the difference between $75,000 and the adjusted basis of her portion of the property?
How does the outside basis fit into this?