Powell owns a 20% interest in Cooke Partnership. At the beginning of 2010, Powell's basis is $22,000. Cooke reports a $90,000 operating loss in 2010, and Powell withdraws $10,000 from the partnership. Cooke's 2011 operating income is $70,000, and Powell withdraws $10,000 from the partnership.
Identify the tax issue(s) posed by the facts presented. Determine the possible tax consequences of each issue that you identify.