### Basis after formation of the partnership

Assignment Help Accounting Basics
##### Reference no: EM13858999

Problem: Suzy contributed assets valued at \$360,000 (basis of \$200,000) in exchange for her 40% interest in Suz-Anna GP (a general partner-ship). Anna contributed land and a building valued at \$640,000 (basis of \$380,000) in exchange for the remaining 60% interest. Anna's property was encumbered by a qualified nonrecourse debt of \$100,000, which was assumed by the partnership. The partnership reports the following income and expenses for the current tax year:

 Sales \$560,000 Utilities, salaries, and other operating expenses 360,000 Short-term capital gain 10,000 Tax-exempt interest income 4,000 Charitable contributions 8,000 Distribution to Suzy 10,000 Distribution to Anna 20,000

During the current tax year, Suz-Anna refinanced the land and building. At the end of the year, Suz-Anna had recourse debt of \$100,000 for partnership accounts payable and qualified nonrecourse debt of \$200,000.

a. What is Suzy's basis after formation of the partnership? Anna's basis?

b. What income and separately stated item does the partnership report on Suzy's Schedule K-1? What items does Suzy report on her tax return?

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