Basis in Partnership Interest. Tina purchases an interest in the TP Partnership

Question

Basis in Partnership Interest. Tina purchases an interest in the TP Partnership on January 1 of the current year for $50, 000. The partnership uses the calendar year as its tax year and has $200, 000 in recourse liabilities when Tina acquires her interest. The partners share economic risk of loss associated with recourse debt according to their loss percentage. Her distributive share of partnership items for the year is as follows: Ordinary income (excluding items listed below) $30, 000 Long-term capital gains 10, 000 Municipal bond interest income 8,000 Charitable contributions 1,000 Interest expense related to municipal bond investment 2,000 TP reports the following liabilities on December 31: Recourse debt $100, 000 non recourse debt (not qualified real estate financing) 80, 000 What is Tina's basis on December 31 if she has a 40% interest in profits and losses? TP is a general partnership. Tina has not guaranteed partnership debt, nor has she made any other special agreements about partnership debt. How would your answer to change if Tina instead had a 40% interest in profits and a 30% interest in losses? Assume TP is a general partnership, and all other agreements continue in place. Also assume the partners share recourse liabilities in accordance with their loss interest percentages. How would your answer to change if Tina were instead a limited partner having a 40% interest in profits and 30% interest in losses? The partnership agreement contains no guarantees or other special arrangements.

Explanation / Answer

a.

b.

c.

Purchase Price 50,000 (+) Share of Liabilities (0.40*200,000) 80,000 Taxable Distributive Share (30,000+10,000-1,000) 39,000 Non-Taxable Distributive Share (8,000-2,000) 6,000 (-) Change in Liabilities (0.4*20,000) (8,000) Basis on December 31 167,000

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