Reference no: EM132885120

Duo Limited Partnership was formed on February 1, 2020, with individuals Y and Z making the following contributions:

Y: Cash of $100,000
Z: Land with $100,000 fair market value and $80,000 basis

Y and Z share profits and losses equally. Duo started business operations on February 1, 2020. The following current year's figures were prepared by Duo's controller. Y is a general partner and materially participates in business operations.

Gross Sales. 700,000
Cost of Goods Sold. 400,000
Salaries to employees. 150,000
Payroll taxes for employees 10,000
Guaranteed payment to Y. 51,000
Operating expenses 150,000
Charitable contributions 20,000
Accounts payable 40,000
Nonrecourse debt 100,000

Problem 1. Calculate the following amounts (show your work).

a. Y's basis in the partnership at February 1, 2020
b. Z's basis in the partnership at February 1, 2020
c. The partnership's basis in the land at February 1, 2020

Problem 2. Calculate the following amounts (show your work).

a. Duo's taxable income for 2020
b. The items allocated to Y for 2020

Problem 3. Calculate Y's basis in the partnership at the end of 2020