60000 each partners initial basis in the partnership

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South-Western Federal Taxation 2020: Corporations, Partnerships, Estates and Trusts
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Chapter 11 / Exercise 5
South-Western Federal Taxation 2020: Corporations, Partnerships, Estates and Trusts
Raabe/Young/Nellen/Hoffman
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$60,000. Each partner’s initial basis in the partnership is $80,000. The basis is reduced by the $15,000 of repaiddebt and increased by each partner’s $10,000 share of new liabilities. Each partner’s basis is then reduced by the$20,000 share of the net operating loss and increased by the $5,000 share of interest income, as follows:Beginning basis$80,000 Plus: share of interest income5,000 Less: decrease in share of partnership debt(5,000)Less: share of S&S loss(20,000)Ending basis$60,000 93. In the current year, the CAR Partnership received revenues of $400,000 and paid the following amounts: $160,000 in rent, utilities, and salaries; a $40,000 guaranteed payment to partner Ryan; $20,000 to partner Amy for consulting services; and a $40,000 distribution to 25% partner Cameron. In addition, the partnership realizeda $12,000 net long-term capital gain. Cameron’s basis in his partnership interest was $60,000 at the beginning of the year, and included his $25,000 share of partnership liabilities. At the end of the year, his share of partnership liabilities was $15,000. a.How much income must Cameron report for the tax year?b.What is Cameron’s basis in the partnership interest at the end of the year?a.$45,000 ordinary income and $3,000 LTCG. The partnership’s ordinary income is calculated as follows: Revenues$400,000 Less: rent, utilities, and salaries(160,000)Less: guaranteed payment to Ryan(40,000)Less: consulting expenses to Amy(20,000)Ordinary income$180,000The distribution to Cameron is not deductible. The payment to Amy is a deductible business expense. Cameron’s share of CAR’s ordinary income is $45,000. The $12,000 net long-term capital gain is a separately stated item, of which Cameron’s share is $3,000. b.Cameron’s basis in his partnership interest is calculated as follows:Beginning basis$60,000 Plus: share of ordinary income45,000 Plus: share of net long-term capital gain3,000 Less: decrease in share of partnership liabilities(10,000)Less: cash distribution to Cameron(40,000)Ending basis$58,000
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South-Western Federal Taxation 2020: Corporations, Partnerships, Estates and Trusts
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Chapter 11 / Exercise 5
South-Western Federal Taxation 2020: Corporations, Partnerships, Estates and Trusts
Raabe/Young/Nellen/Hoffman
Expert Verified
94. In the current year, Derek formed an equal partnership with Cody. Derek contributed land with an adjusted basis of $110,000 and a fair market value of $200,000. Derek also contributed $50,000 cash to the partnership. Cody contributed land with an adjusted basis of $80,000 and a fair market value of $230,000. The land contributed by Derek was encumbered by a $60,000 nonrecourse debt. The land contributed by Cody was encumbered by $40,000 of nonrecourse debt. Assume the partners share debt equally. Immediately after the formation, what is the basis of Cody’s partnership interest? $90,000. Cody’s basis is determined as follows:Basis of land$80,000 Deemed cash distribution (relief of Cody’s debt)(40,000)Share of Cody’s debt20,000 Share of Derek’s debt30,000 Cody’s basis$90,000 95. Morgan is a 50% managing member in the calendar year, cash basis MKK LLC. The LLC received $150,000 income from services and paid the following other amounts:Rent expense$10,000Salary expense to employees40,000Payment to Morgan for services, per the operating agreement30,000Distributions to partners, Kristin and Katie12,000Payment to 30% cash basis partner Katie for tax and accounting services10,000

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