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C:9-32 Partnership Income and Basis Adjustments. M...




C:9-32 Partnership Income and Basis Adjustments. Mark and Pamela are equal partners in MP Partnership. The partnership, Mark, and Pamela are calendar year taxpayers. The partnership incurred the following items in the current year: Sales $450,000 Cost of goods sold 210,000 Dividends on corporate investments 15,000 Tax-exempt interest income 4,000 Section 1245 gain (recapture) on equipment sale 33,000 Section 1231 gain on equipment sale 18,000 Long-term capital gain on stock sale 12,000 Long-term capital loss on stock sale 10,000 Short-term capital loss on stock sale 9,000 Depreciation (no Sec. 179 or bonus depreciation components) 27,000 Guaranteed payment to Pamela 30,000 Meals and entertainment expenses 11,600 Interest expense on loans allocable to: Business debt 42,000 Stock investments 9,200 Tax-exempt bonds 2,800 Principal payment on business loan 14,000 Charitable contributions 5,000 Distributions to partners ($40,000 each) 80,000 a. Compute the partnership?s ordinary income and separately stated items. b. Show Mark?s and Pamela?s shares of the items in Part a. c. Compute Mark?s and Pamela?s ending basis in their partnership interests assuming their beginning balances are $150,000 each.


Paper#4818 | Written in 18-Jul-2015

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