Nancy is a 50% partner in the Nancy and Peter partnership.

The partnership received $300,000 from services and paid the following expenses:

Rent	$80,000
Salaries	50,000
Guarantee to Nancy	60,000
Distributions to Peter	30,000
Guarantee to Peter	20,000
Municipal interest income	10,000
Interest expense on loan to purchase municipal bonds	4,000
Liabilities at 12/31	40,000

Required:

1. How much is Nancy's AGI increased from the partnership items of income and deduction?

2. How are the items of income or deduction reported to Nancy?

(ordinary or separately stated items)

3. Nancy's basis at the beginning of the year (without liabilities) was $100,000.

What is her basis at 12/31?

4. Discuss the concept of inside and outside basis.

Answer rating: 100% (QA)

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