Suzy contributed assets valued at $360,000 (basis of $200,000) in exchange for her 40% interest in Suz-Anna GP (a general partnership in which both partners are active owners). 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 qualified nonrecourse financing of $100,000, which was assumed by the partnership.

The partnership reports the following income and expenses for the current tax year.

At the end of the year, Suz-Anna held recourse debt of $100,000 for partnership accounts payable and qualified nonrecourse financing of $200,000.

a. How would Suz-Anna’s ending liabilities be treated?

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b. How would Suzy’s basis and amount at risk be different? Explain.

  

Transcribed Image Text:

Sales Utilities, salaries, depreciation, other operating expenses Short-term capital gain Tax-exempt interest income Charitable contributions (cash) Distribution to Suzy Distribution to Anna $560,000 360,000 10,000 4,000 8,000 10,000 20,000 Sales Utilities, salaries, depreciation, other operating expenses Short-term capital gain Tax-exempt interest income Charitable contributions (cash) Distribution to Suzy Distribution to Anna $560,000 360,000 10,000 4,000 8,000 10,000 20,000

Answer rating: 100% (QA)

a Since SA was formed as LLC and as per LLC all particul... View the full answer