Aaron, Deanne, and Keon formed the Blue Bell General Partnership at the beginning of the current year.
Question:
Aaron, Deanne, and Keon formed the Blue Bell General Partnership at the beginning of the current year. Aaron and Deanne each contributed $122,000, and Keon transferred an acre of undeveloped land to the partnership. The land had a tax basis of $71,800 and was appraised at $192,000. The land was also encumbered with a $71,800 nonrecourse mortgage for which no one was personally liable. All three partners agreed to split profits and losses equally. At the end of the first year, Blue Bell made a $8,200 principal payment on the mortgage. For the first year of operations, the partnership records disclosed the following information:
Sales revenue$ 488,000Cost of goods sold419,600Operating expenses79,600Long-term capital gains2,5801231 gains900Charitable contributions300Municipal bond interest300Salary paid as a guaranteed payment to Deanne (not included in expenses)3,000
Required:
- Compute the adjusted basis of each partner's interest in the partnership immediately after the formation of the partnership.
- List the separate items of partnership income, gains, losses, and deductions that the partners must show on their individual income tax returns that include the results of the partnership's first year of operations.
d. What are the partners' adjusted basis in their partnership interests at the end of the first year of operations?
Taxation Of Individuals And Business Entities 2015
ISBN: 9780077862367
6th Edition
Authors: Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver