C932 Partnership Income and Basis Adjustments Mark and Pamel

C:9-32 Partnership Income and Basis Adjustments. Mark and Pamela are equal partners in MP Partnership. The partnership, Mark, and Pamela are calendar year taxpayers. The partner- ship incurred the following items in the current year: Sales Cost of goods sold Dividends on corporate investments lax-exempt interest income Sec. 1245 gain (recapture) on equipment sale Sec. 1231 gain on equipment sale Long-term capital gain on stock sale Long-term capital loss on stock sale Short-term capital loss on stock sale Depreciation (no Sec. 179 or bonus depreciation components) Guaranteed payment to Pamela Meals and entertainment expenses Interest expense on loans allocable to: $450,000 210,000 15,000 4,000 33,000 18,000 12,000 10,000 9,000 27,000 30,000 11,600 Business debt 42,000 9,200 2,800 14,000 5,000 80,000 Stock investments Tax-exempt bonds Principal payment on business loan Charitable contributions Distributions to partners ($40,000 each) a. Compute the partnership\'s ordinary income and separately stated items. b. Show Mark\'s and Pamela\'s shares of the items in Part a. c. Compute Mark\'s and Pamela\'s ending basis in their partnership interests assuming their beginning balances are $150,000 each.

Solution

Answer:-

Particular

Amount($)

Sales

450,000

-Cost of goods sold

(210,000)

Sec 1245 gain

33,000

Depreciation

(27,000)

Guaranteed payment to Pamela

(30,000)

Meals & entertainment Exp.(11,600*2)

(5800)

Business Debt

(42,000)

Total partnership\'s ordinary income

168,200

Particular

Amount

Mark

Pamela

Dividend on corporate investment

15,000

7,500

7,500

Tax- Exempt interest income

4,000

2,000

2,000

Sec 1231 gain

18,000

9,000

9,000

Long term capital gain (12,000-10,000)

2,000

1,000

1,000

Short term capital loss

(9,000)

(4,500)

(4,500)

Stock Investment

(9,200)

(4,600)

(4,600)

Tax-exempt Bond s

(2,800)

(1,400)

(1,400)

Charitable contributions

(5,000)

(2,500)

(2,500)

Nondeductible expenses

(5,800)

(2,900)

(2,900)

Guaranteed payment

30,000

30000

Total

37,200

c. Compute Mark and Pamela’s ending basis in their partnership interests assuming their beginning balances are $150,000 each

Particular

Mark

Pamela

Partnership\'s ordinary income $168,200

84,100

84,100

Dividend on corporate investment

7,500

7,500

Tax- Exempt interest income

2,000

2,000

Sec 1231 gain

9,000

9,000

Long term capital gain

1,000

1,000

Short term capital loss

(4,500)

(4,500)

Stock Investment

(4,600)

(4,600)

Tax-exempt Bond s

(1,400)

(1,400)

Charitable contributions

(2,500)

(2,500)

Nondeductible expenses meals and entertainment

(2,900)

(2,900)

Reduction in Partnership liabilities

(7,000)

(7,000)

40,700

40,700

Beg Bal $150,000 each

150,000

150,000

Total Sharesof items

40,700

40,700

Ending Basis for each partner

190,700

190,700

Particular	Amount($)
Sales	450,000
-Cost of goods sold	(210,000)
Sec 1245 gain	33,000
Depreciation	(27,000)
Guaranteed payment to Pamela	(30,000)
Meals & entertainment Exp.(11,600*2)	(5800)
Business Debt	(42,000)
Total partnership\'s ordinary income	168,200