At the beginning of 2016, Margaret’s adjusted basis in her 50 percent interest i

Question

At the beginning of 2016, Margaret’s adjusted basis in her 50 percent interest in MP Partnership, a calendar year general partnership, was $10,000. During 2015, Margaret did not make any additional contributions to MP Partnership, and Margaret’s share of MP Partnership liabilities did not change. During 2015, MP Partnership distributed $5,000 to Margaret, and MP Partnership had the following items of partnership income, deduction, gain and loss for 2016:

Separately stated taxable income                                  $30,000

Tax-exempt interest                                                         $10,000

Capital loss ($20,000)

What is Margaret’s adjusted basis in her partnership interest in MP Partnership at the end of 2016?

a.             0

b.            $10,000

c.             $15,000

d.            $25,000

Explanation / Answer

The option is B ie., $10,000

Reason : As the Margarets adjusted basis in her partnership interest in Mp Partnership at the beginning of the year 2016 is $10,000

and there are no more additions to the partnership interest in the given year as well as in the previous year 2015.

hence, The Margarets adjusted basis in her partnership interest in MP partnership at the end of the year 2016 will continue to be $10,000

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