On January 1, 2013, John Pierce acquired a 10 percent interest in the Saratoga and Company partnership for a cash investment of $20,000 In 2013, the partnership reported an ordinary loss of $40,000, of which Pierce 's distributive share was $4,000 On January 1, 2013, the partnership had no liabilit...

Pierces basis in Saratoga and Company is ...

On January 1, 2013, John Pierce acquired a 10 percent interest in the Saratoga and Company partnership

Question:

On January 1, 2013, John Pierce acquired a 10 percent interest in the Saratoga and Company for a cash investment of $20,000. In 2013, the reported an ordinary loss of $40,000, of which Pierce's distributive share was $4,000. On January 1, 2013, the had no liabilities; however, during 2013 the received the following loans: (a) a $50,000 loan from the Second National Bank, due June 30, 2014, and (b) a $100,000 nonrecourse loan (secured by inventory) from the Union Finance Company, due December 31, 2014. After allocation of the operating loss, what should be the tax basis of Pierce's interest on December 31, 2013?
a. $16,000
b. $20,000
c. $21,000
d. $31,000
Partnership
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...