C:9-32 Partnership Income and Basis Adjustments. Mark and Pamela are equal partn
ID: 2400046 • Letter: C
Question
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 $150,000 each.Explanation / Answer
Answer:-
Particular
Amount($)
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
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