Hello,

I am having a hard time answering part c of this homework assignment:

1.Ted is a 20 percent general partner in Bevo.

Bevo Partnership had the following financial activity for the year:

Gross receipts from sales : $360,000

Cost of Goods sold: (390,000)

Operatng Expenses: (180,000)

Business meals + entertain. (20,000)

Sec 1231 gain on equip sale 5,000

Distribution to partners (75,000)

a.Compute Ted's share of partnership ordinary income and separately stated items.

Ordinary Business Income:

$860,000 - 390,000 - 180,000 - (20,000*0.5) = $280,000

Ted's share of partnership on ordinary income:

$280,000 * 0.20 = $56,000

Non-deductible expenses (business meals and entertainment):

$20,000 * 0.50 * 0.20 = $2,000

Section 1231 gain on equipment sale:

$5,000 * 0.20 = $1,000

Distribution to partners:

$75,000 * 0.20 = $15,000

b.If Ted's adjusted basis in his Bevo interest was $30,000 at the beginning of the year, compute his adjusted basis at the end of the year. Assume that Bevo's debt did not change during the year.

$30,000 + $56,000 - $2,000 + $1,000 - $15,000 = $70,000

c.How would your basis computation change if Bevo's debt at the end of the year as $50,000 less than its debt at the beginning of the year?

It would drop by $50,000.

186,000 - 50,000*0.5