Suzy contributed business-related assets valued at $360,000 (basis of $200,000) in exchange for her 40% interest in the Suz-Anna Partnership. 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 a qualified nonrecourse debt of $100,000, which was assumed by the partnership. The partnership reports the following income and expenses for the current tax year.
Sales................. $560,000
Utilities, salaries, and other operating expenses 360,000
Short-term capital gain.......... 10,000
Tax-exempt interest income......... 4,000
Charitable contributions.......... 8,000
Distribution to Suzy............ 10,000
Distribution to Anna........... 20,000
At the end of the year, Suz-Anna held recourse debt of $100,000 for partnership accounts payable and qualified nonrecourse debt of $200,000.
a. What is Suzy's basis after formation of the partnership? Anna's basis?
b. What income and separately stated items does Suz-Anna report on Suzy's Schedule K-1? What items does Suzy report on her tax return?
c. All partnership debts are shared proportionately. At the end of the tax year, what are Suzy's basis and amount at risk in her partnership interest?