Reference no: EM13508582
The KL Partnership is owned equally by Kayla and Lisa. Kayla's basis is $20,000 at the beginning of the tax year. Lisa's basis is $16,000 at the beginning of the year. KL reported the following income and expenses for the current tax year:
Sales revenue $150,000
Cost of sales 80,000
Distribution to Lisa 15,000
Depreciation expense 20,000
Utilities 14,000
Rent expense 18,000
Long-term capital gain 6,000
Payments to Mercy Hospital for Kayla's medical expenses 12,000
a. Determine the ordinary partnership income and separately stated items for the partnership
b. Calculate Kayla's basis in her partnership interest at the end of the tax year. What items should Kayla report on her federal income tax return?
c. Calculate Lisa's basis in her partnership interest at the end of the tax year. What items should Lisa report on her Federal income tax return?
49. Suzy contributed business-related assets valued at $360,000 (basis of $200,000) in exchange for her 40% interest in the Suz-Anna Partnership. 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
Distributions 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 non-recourse debt of $200,000.
a. What is Suzy's basis after formation of the partnership? Anna's basis?
b. What income and separately stated items does the partnership report on Suzy's Schedule K-1? What items does Suzy report on her tax return?
c. Assume that all partnerships debts are shared proportionally. At the end of the tax year, what are Suz's basis and amount at risk in her partnership interest?
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