Reference no: EM133026489

Question - A and B are equal partners in a general partnership. A has a basis of $30,000 in his partnership interest. B has a basis of $10,000 in her partnership interest. What is the effect of each of the following events on the basis of each partner's partnership interest? When is the effect taken into account?

a. The partnership makes a charitable contribution of $5,000

b. Each partner's distributive share of the partnership's taxable income is $10,000.

c. The partnership has $8,000 in interest income from tax-exempt municipal bonds.

d. The partnership makes a cash distribution of $10,000 to each partner.

e. The partnership exchanges rental real estate with a fair market value of $100,000 and an adjusted basis of $30,000 for other real estate worth $100,000 in a Section 1031 exchange.

f. During the year, a lease is terminated. The partnership's lessee expended $30,000 in improvements which were not substitutes for rent during the lease period. The fair market value of the improvements is $50,000 on the date the partnership takes possession of the leased premises.

g. The partnership pays $2,000 in life insurance premiums to insure the lives of key employees, with the partnership named as beneficiary.