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Kari is a partner in Lizard Partnership. This year, Kari's share of partnership ordinary income is $20,000 and she received a cash distribution of $30,000. Kari's tax basis in her partnership interest at the beginning of the year was $50,000. Her marginal tax rate is 25 percent.
a. Calculate the tax cost of Kari's partnership earnings this year.
b. Compute Kari's after-tax cash flow from her partnership activity this year.
c. Compute Kari's tax basis in her partnership interest at the ending of the year. Assume no change in her share of partnership liabilities during the year.
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The internal rate of return is most reliable when evaluating:
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