In the current year, Mary, Andrew, and Paul formed Venezia General Partnership. Mary contributed $55,000 cash, Andrew contributed $55,000, and Paul contributed land with a cash basis of $70,000 and a fair market value of $180,000. The partnership assumed a $70,000 mortgage on the land; no partner is personally liable for the mortgage. At the end of the current year, Venezia made a $7,000 payment on the mortgage. Mary, Andrew, and Paul will split all profits and losses equally.

Current-year operations had the following results:

• Sales revenue: $260,000
• Cost of goods sold: $205,000
• Operating expenses: $35,000
• Long-term capital gains: $1,200
• Section 1231 Gains: $450
• Charitable contributions: $350
• Municipal bond interest: $150
• Salary paid as a guaranteed payment to Andrew (not included in expense): $1,500
• Using Thomson Reuters, find a court case discussing partners' basis in the partnership interest. Summarize the court case and tax law relating to basis calculations. Using the information summarized, determine Mary's, Andrew's, and Paul's initial basis in the partnership interest and the basis for each partner at the end of the current year

What are the significant tax issues faced during the current year?

Answer rating: 100% (QA)

Explanation Hence Initial tax basis Mary has 7833333 Andrew has 783333... View the full answer