AB Partnership was formed on February 1, 2022, with individuals A and B making the following contributions:

A: Cash of $100,000

B: Land (FMV $100,000, basis $90,000)

A and B share profits equally. AB Limited started a service business on February 1, 2022. A and B are both general partners The following is a summary of 2022 operations, using the cash method of accounting:

Gross sales $900,000

Cost of goods sold 400,000

Employee salaries 150,000

Payroll taxes for employees 10,000

Guaranteed payments to A 50,000

Operating expenses 150,000

Charitable contributions 20,000

Net capital gain 5,000

The amount of recourse debt, incurred by AB Partnership, at December 31, 2022 was $40,000.

Based on the above information, calculate the following:

A- AB Partnership taxable income for 2022

B- A's basis in the partnership at February 1, 2022 and December 31, 2022.

C- The partnership basis in the assets contributed by A and B at February 1, 2022.

D- What summary advice would you give to A and B regarding the availability of a Deduction for Qualified Business Income?

E- In general terms, without computations, how

Answer rating: 100% (QA)

A To calculate AB Partnerships taxable income for 2022 we need to start with the gross sales and subtract the cost of goods sold operating expenses em... View the full answer