Assume the same facts as in Problem 48, and assume that Suz-Anna prepares the capital account rollforward on the partners’ Schedules K–1 on a tax basis.

a. What is Suzy’s capital account balance at the beginning of the tax year?

b. What is Suzy’s capital account balance at the end of the tax year?

c. What accounts for the difference between Suzy’s ending capital account and her ending tax basis in the partnership interest?

Problem 48

Suzy contributed assets valued at $360,000 (basis of $200,000) in exchange for her 40% interest in Suz-Anna GP (a general partnership). Anna contributed land and a building valued at $640,000 (basis of $380,000) in exchange for the remaining 60% interest. Anna’s property was encumbered by a qualified nonrecourse debt of $100,000, which was assumed by the partnership.
The partnership reports the following income and expenses for the current tax year:
Sales ........................................................................................... $560,000
Utilities, salaries, and other operating expenses ........ 360,000
Short-term capital gain ........................................................... 10,000
Tax-exempt interest income ................................................... 4,000
Charitable contributions .......................................................... 8,000
Distribution to Suzy ................................................................. 10,000
Distribution to Anna ............................................................... 20,000