GP Partnership, a calendar-year partnership, is owned by Grant Gilbert (60%) and Peter Paulson (40%). At the beginning of 2020, Grants basis in his GP Partnership interest was $480,000 and Peters basis in his GP Partnership interest was $320,000. During 2020, GP Partnership had the following items of income and (expense):

Gross receipts from sales 2,500,000

Cost of goods sold (1,200,000)

Long-term capital gain 45,000

Tax-Exempt Interest 7,000

Advertising expenses (128,000)

MACRS Depreciation (428,000)

Office expenses (75,000)

Charitable Contribution (11,000)

Qualified dividends income 30,000

Rent expenses (109,000) Salaries (286,000)

In addition to the above items, GP Partnerships liabilities decreased by $60,000. Please show your work and explain your calculation for the following questions.

a) What is GP Partnerships 2020 ordinary business income or loss and how much of the ordinary income or loss is allocated to Grant and Peter?

b) What items of income and expense must GP Partnership separately report and what is Grant and Peters allocable share of the separately stated items? Question 2 continued

c) What are Grants and Peters outside bases in their GP Partnership interests at the end of 2020?