An examination of the RB Partnerships tax books provides the following information for the current year.

Operating (ordinary) income before guaranteed payments $300,000

Long-term capital gain 6,000

Guaranteed payment to Rachel for services 30,000

Cash distributions to Rachel (20,000)

Interest on Colorado state bonds (exempt interest income) 2,000

Charitable contributions made by partnership (10,000)

Decrease in all partnership liabilities from 1/1-12/31 (20,000)

Rachel is a 30% general partner in partnership capital, profits, and losses. Assume that the adjusted basis of her partnership interest (including liability share) is $60,000 at the beginning of the year, and she shares in 30% of the partnerships liabilities for basis purposes.

a. What is Rachels adjusted basis for the partnership interest at the end of the year?

b. How much income must Rachel report on her tax return for the current year? What deductions might be available? What is the character of the income and what types of tax might apply to it?