The KL Partnership is owned equally by Kayla and Lisa. Kayla\'s basis is $20,000
ID: 2451824 • Letter: T
Question
The KL Partnership is owned equally by Kayla and Lisa. Kayla's basis is $20,000 at the beginning of the tax year. Lisa's basis is $16,000 at the beginning of the year. Assume partnership debt did not change from the beginning to the end of the tax year. KL reported the following income and expenses for the current tax year:
a. Enter a value in the fields below.
The partnership's net income is $ _____.
The separately stated income items total $ _____.
Enter below the end of the tax year basis for each partner.
b. Kayla's basis in her partnership interest at the end of the tax year is $ _____.
c. Lisa's basis in her partnership interest at the end of the tax year is $ _____.
Sales revenue $150,000 Cost of sales 80,000 Distribution to Lisa 15,000 Depreciation expense 20,000 Utilities 14,000 Rent expense 18,000 Long-term capital gain 6,000 Payment to Mercy Hospital for Kayla's medical expenses 12,000Explanation / Answer
The partnership's ordinary taxable income is determined as follows:
(a) Total ordinary income
$ 18,000
Separately stated items:
Long term capital gain $6,000
The distribution to Lisa is not deductible by the partnership. The payment to Mercy hospital for Kayla's expenses is treated as a distribution to Kayla in the amount of $ 12,000. Kayla may claim adeduction for medical expenses on her personal income tax return.
(b) Kayla's basis in her partnership interesr at the end of the taxyear is :
Beginning basis $ 20,000
Share of partnership income 9,000 *
Share of separately stated income 3000*
(Long term capital gain)
Distribution (payment for medical exp) (12,000)
Ending basis in Interest $20,000 (after above calculation)
* These items are reported on Kayla's personal income tax return.
(c) Lias's basis in her partnership interest at the end of the tax year is:-
Beginning basis $16,000
Share of partnership income 9,000*
Share os separetely stated items 3,000*
(Long term capital gain)
Distribution to Lisa (15,000)
Ending basis in interest $13,000 (after above calculation)
These items are reported on Lias's personal income tax return.
Sales revenue $ 150,000 Cost of sales $ (80,000) Depreciation expense $ (20,000) Utilities $ (14,000) Rent expense $ (18,000)(a) Total ordinary income
$ 18,000
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