Allison, Keesha, and Steven each own equal interests in KAS partnership, a calen

Question

Allison, Keesha, and Steven each own equal interests in KAS partnership, a calendar year-end, cash-method entity. On January 1 of the current year, Steven’s basis in his partnership interest is $29,750. During January and February, the partnership generates $33,630 of ordinary income and $5,358 of tax exempt income. On March 1, Steven sells his partnership interest to Juan for a cash payment of $51,050. The partnership has the following assets and no liabilities at the sale date:

   Tax Basis FMV

Cash $ 35,500    $35,500

Held for investment $ 35,500    $71,000

Totals    $71,000    $106,500

a. Assuming KAS’s operating agreement provides for an interim closing of the books when partners’ interests change during the year, what is Steven’s basis in his
partnership interest on March 1 just prior to the sale

Explanation / Answer

a)

Particulars Amount($) Outside Basis as of January 1 29750 Add :- Distributive Share of Income Ordinary ($33630/3) 11210 Tax Exempt ($5358/3) 1786 Outside Basis as of March 1 42746

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