Problem: Module $7$ Textbook Problem $10$

Learning Objective: $7-9$ Identify similarities and differences in the tax treatment of S corporations versus partnerships

Potato, an individual, is a $20$ percent owner of Starch LLC$.$ This year, Potato was allocated $$45,000$ of ordinary income from Starch

LLC$,$ $$1,000$ of tax$-$exempt interest income, and $$2,000$ of nondeductible expenses. Potato also received a $$10,000$ distribution from

Starch LLC this year. At the beginning of the year, Starch LLC had outstanding debt of $$100,000.$ At the end of the year, the entity's

outstanding debts increased to $$130,000.$

Required:

a$.$ If Starch LLC is taxed as a partnership, and her basis in her partnership interest at the beginning of the year is $$30,000,$ determine

Potato's tax basis in her partnership interest at year$-$end.

b$.$ If Starch LLC is taxed as an S corporation, and her basis in her S corporation stock at the beginning of the year is $$10,000,$

determine Potato's tax basis in her corporate stock at year$-$end.

Complete this question by entering your answers in the tabs below.

If Starch LLC is taxed as a partnership, and her basis in her partnership interest at the beginning of the year is $$30,000,$

determine Potato's tax basis in her partnership interest at year$-$end.

Tax basis