Question
Can you please help me show the initial tax basis and year end tax basis for each partner in the scenario? Please include the calculations
Can you please help me show the initial tax basis and year end tax basis for each partner in the scenario?
Please include the calculations and descriptions.
Fran, Ernie, and Watson formed the TEW General Partnership at the beginning of 2022. Fran and Ernie each contributed $50,000 and Watson transferred an acre of undeveloped land to the partnership. The land had a tax basis of $20,000 and was appraised at $100,000. The land was also encumbered with a $50,000 nonrecourse mortgage for which no one was personally liable. All three partners agreed to split profits and losses equally. At the end of the first year, FEW made a $12,000 principal payment on the mortgage.
This is what I came up with for the intitaial tax basis:
Initail tax bais | |||
Description | Frank | Earnest | Wilma |
Cash Contributed | $ 50,000.00 | $ 50,000.00 | |
Basis in contributed land | $ 20,000.00 | ||
Members share of recourse bank loan | |||
Nonrecourse mortgage in excess of basis in contributed land | $ 30,000.00 | ||
Remaining nonrecourse mortgage | $ 5,000.00 | $ 5,000.00 | $ 10,000.00 |
Relief from mortgage liability | $ (50,000.00) | ||
member initail outside basis | $ 55,000.00 | $ 55,000.00 | $ 10,000.00 |
This is what I have come up with for the year end tax basis but am stuck:
Adjusted Tax Basis | |||
Description | Fran | Ernie | Watson |
Initail Outside Basis | $ 55,000.00 | $ 55,000.00 | $ 10,000.00 |
+Ordinary Business Income | $ 46,050.00 | $ 46,050.00 | $ 92,100.00 |
+Cash contributions | 0 | 0 | 0 |
+ Share of tax-exempt income | $82.50 | $82.50 | $165.00 |
+ Short term capital gains | $600 | $600 | $1,200 |
- Cash Distributions | 0 | 0 | 0 |
- Share of nondeductible expenses | |||
- Ordinarty business loss and Seperately Stated Loss items | |||
- Disallowed busines interst expense | |||
Member Tax (outside) basis | $ 101,732.50 | $ 101,732.50 | $ 103,465.00 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started