Rick has a $50,000 basis in the RKS General Partnership on January 1 of the current year, and he owns no other investments. He has a 20% capital interest, a 30% profits interest, and a 40% loss interest in the partnership. Rick does not work in the partnership. The partnership’s only liability is a $100,000 nonrecourse debt borrowed several years ago, which remains outstanding at year-end. Rick’s share of the liability is based on his profits interest and is included in his $50,000 partnership basis. Rick and the partnership each report on a calendar year basis. Income for the entire partnership during the current year is:
Ordinary loss …………………………… $440,000
Long-term capital gain …………………. 100,000
Sec. 1231 gain …………………………. 150,000
a. What is Rick’s distributive share of income, gain, and loss for the current year?
b. What partnership income, gain, and loss should Rick report on his tax return for the current year?
c. What is Rick’s basis in his partnership interest on the first day of next year?