You are a Certified Public Accountant at Illini, LLP (a public accounting firm). Your clients, Annie and Bobby Jones have come to with some questions about their tax return. Annie (age 38) and Bobby (age 39) are married with two children, ages 7 and 11. Annie and Bobby have always filed as married filing jointly in the past and they see no reason why they would not choose that filing status again this year. During the year, Annie and Bobby engaged in the following activities: Annie Annie was a partner in Angles LLP, a local architecture firm. Annie received a Schedule K-1 from Angles. According to the Schedule K-1, Annie's distributive share of the partnership's income and expenses were as follows: Ordinary business income: $100,000 Guaranteed payments: $25,000 Net Section 1231 loss: $5,000 Short-term capital losses: $1,000 Long-term capital gains: $2,000 Charitable contributions: $2,500 Tax-exempt interest income: $4,000 Non-deductible Expenses: $8,000 Annie also received the following in a proportional distribution: $20,000 in cash and a vacant lot with a fair market value of $80,000, a book value of $60,000, and an adjusted basis inside the partnership of $50,000. Annie's basis in the partnership was $200,000 at the beginning of the year. Annie's capital account balance at the beginning of the year was $250,000. Annie's share of the partnership's liabilities also increased by $25,000. To account for her partnership income, Annie, during the tax year, made estimated tax payments of $15,000 to the IRS and estimated tax payments of $5,000 to the State of Illinois.

Bobby Bobby spent the year employed as the bakery manager of a local grocery store, where he has worked for the past 10 years. His Form W-2 wages were $60,000, and he had $12,000 of federal taxes withheld and $4,000 of state taxes withheld. Bobbywho has always had a passion for breakfast pastriesbegan to experiment with creating his own specialty donuts. Initially, Bobby would bake the donuts at home on the weekends and provide them to his friends and neighbors free of charge. Eventually, based on the positive reviews he received, he decided to ramp up his donut production and began selling his donuts on Saturday mornings at the local farmer's market. Bobby also accepted a few special catering requests on his days off at the grocery store. In order to make the increased quantity of donuts his hungry customers required, Bobby installed commercial cooking equipment in an unused corner of the couple's large kitchen. While preparing donuts for just friends and family, he did not keep track of any expenses related to his donut baking. However, once Bobby began selling donuts, he began using an accounting software to keep track his income and expenses. His donut sales were $15,000 and his expenses (ingredients, baking supplies, etc.) were $9,000.

Additional Items Four years ago, Bobby and Annie made a small investment in a start-up corporation, Craft Ice, Inc. (a c-corporation). The company's business model was the delivery of artisanal ices to their customers' doorsteps as part of an "ice of the month club." However, the business was unsuccessful and during 2017, Craft Ice, Inc. completely liquidated. As part of the liquidation, Bobby and Annie received $200 in cash. Their initial investment (and current adjusted basis) in the corporation was $7,200. Annie and Bobby also received a cash distribution from another c-corporation they invested in, Panda Prints, Inc., a company that sells office supplies with designs of red pandas. The cash distribution was for $2,000. Due to Panda Prints' lack of earnings and profits, $1,000 of the distribution was a dividend and $1,000 was a non-dividend. Prior to the distribution, Annie and Bobby's adjusted basis in their Panda Prints stock was $10,000. Annie and Bobby also had the following additional items of income and expense during the year: They paid $5,000 in student loan interest They paid mortgage interest expense on their home of $6,000 The paid real estate taxes on their home of $2,000 They made cash contributions of $6,000 to a local public television station (a qualifying nonprofit organization). In exchange for their donation, they received a box set of all 5 seasons of their favorite reality television show, "Quilting Wars" (valued at $250) They incurred qualifying medical expenses totaling $5,000. What is Annie's basis in the land she received from her partnership?

Answer rating: 100% (QA)

Annies Basis in the Land Received from the Partnership Annie received a vacant lot with a fair marke... View the full answer