Let’s look at both the facts and the spreadsheet from Problem 46. Consider the results if the partnership’s revenues were $100,000 instead of $150,000.

a. What happens if you update the revenues line on your spreadsheet? Are your new amounts correct for the Form 1065/Schedule K information, Schedule K–1 information, and partners’ bases? Why or why not?

b. Use the ordering rules of Exhibit 21.2 (and the loss limitation rules), and calculate Kayla’s basis in her partnership interest at the end of the year. Based on this calculation, what does Kayla report on her tax return?

c. Make the same calculation for Lisa. What will Lisa report on her tax return?

d. Do the amounts you calculated in part (b) and part (c) equal the amounts shown on your spreadsheet? Why or why not?

Problem 46.

The KL Partnership is owned equally by Kayla and Lisa. Kayla’s basis is $20,000 at the beginning of the tax year. Lisa’s basis is $16,000 at the beginning of the year. Assume partnership debt did not change from the beginning to the end of the tax year. KL reported the following income and expenses for the current tax year:
Sales revenue ...................................................................................... $150,000
Cost of sales ............................................................................................. 80,000
Distribution to Lisa ................................................................................ 15,000
Depreciation expense............................................................................ 20,000
Utilities ........................................................................................................ 14,000
Rent expense ........................................................................................... 18,000
Long-term capital gain ........................................................................... 6,000
Payment to Mercy Hospital for Kayla’s medical expenses ..... 12,000