2. The Grimm Brothers Partnership plans to distribute cash of $25,000 to long-time partner Jacob at the end of the tax year. The partnership will report a loss for 2020 and Jacobs share of the loss is $14,000. He has a basis of $18,500 in his partnership interest, including his share of partnership liabilities, prior to consideration of the distribution or the loss. The partnership expects to report substantial income in 2021. Jacobs cumulative excess business losses will be less than the applicable limit.

a. What rules are used to calculate ending basis in a partnership interest?

b. If Grimm Brothers makes the distribution to Jacob at the end of 2020, how much income or loss will he report for the tax year?

c. Will any of the $14,000 loss be suspended? d. Could any planning opportunities be used to improve the tax ramifications of the distribution?