Chapter: 9-32

Partnership Income and Basis Adjustments. Mark and Pamela are equal partners in MP Partnership. The Partnership, Mark, and Pamela are calendar year taxpayers. The partnership incurred the following items in the current year:

Item	Amount
Sales	450,000
Cost of goods sold	210,000
Dividends on corporate investments	15,000
Tax-exempt interest income	4,000
Sec. 1245 gain (recapture) on equipment sale	33,000
Sec. 1231 gain on equipment sale	18,000
Long-term capital gain on stock sale	12,000
Long-term capital loss on stock sale	10,000
Short-term capital loss on stock sale	9,000
Depreciation (no Sec. 179 or bonus depreciation components)	27,000
Guaranteed payment to Pamela for services	30,000
Expense for business meals	2,000
Interest expense on loans allocated to:
Business debt	42,000
Stock investments	9,200
Tax-exempt bonds	2,800
Principal payment on business loan	14,000
Charitable contributions	5,000
Distributions to partners ($40,000 each)	80,000

1. Compare the partnerships ordinary income and separately stated items. See Problem C:9-59 for related Form 1065, Schedule K.
2. Show Marks and Pamelas shares of the items in part a. Which items would qualify as business income for the QBI deduction?
3. Compute Marks and Pamelas ending basis in their partnership interests assuming their beginning balances are 150,000 each.