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Zelda owns a 60 percent general interest in YZ Partnership. At the beginning of

ID: 2461223 • Letter: Z

Question

Zelda owns a 60 percent general interest in YZ Partnership. At the beginning of 2014, the adjusted basis in her YZ interest was $95, 000, For 2014, YZ generated a $210,000 business los, earned $14,600 dividend and interest income on its investment, and recognized a $6,200 capital gain, YZ made no distributions to its partners and had no debt. How much for her share of YZ's loss can Zelda deduct on her 2014 return? Compute Zelda's adjusted basis in her YZ interest at the end of 2014. Would your answers change if Zelda received a $5,000 cash distribution from YZ during 2014? Refer to the facts in the preceding problem. In 2015. YZ generated $7,000 ordinary business income and $18,000 dividend and interest income. The partnership made no distributions. At the end of the year, YZ had $21,000 debt. How much partnership income will Zelda report on her 2015 return? Compute Zelda's adjusted basis in her YZ interest at the end of 2015. At the beginning of 2015, Ms. P purchased a 20 percent interest in PPY Partnership for $20,000. Ms. P's Schedule K-1 reported that her share of PPY's debt at year-end was $12,000 and her share of ordinary' loss was $28,000. On January 1, 2016, Ms. P sold her interest to another partner for $2,000 cash. How much of her share of PPY's loss can Ms. P deduct on her 2015 return? Compute Ms. P's recognized gain on sale of her PPY interest.

Explanation / Answer

Zelda’s Loss of 2014 is computed as under:

Adjusted Basis $95,000

60% of Dividend 8,760

60% of Capital gain 3,720

2014 loss (Lower of adjusted basis and business loss) $107,480- 126,000 = $18,520

a.

Partnership Income reported by Zelda in 2015 return is as follows:

Adjusted basis 0

60% of Dividend 10,800

60% of Business Income 4,200

60% of Debt 12600

Total amount to be deducted from loss $27,600

So loss reported in 2015 is $4,200 income minus 18,520 previous year loss which comes to $ 14,320.

b.

Adjusted basis for 2015 is $27,600.