Question
Kari is a partner in Lizard Partnership. This year, Kari's share of partnership ordinary income is $20,000, and she received a cash distribution of $30,000.
Kari is a partner in Lizard Partnership. This year, Kari's share of partnership ordinary income is $20,000, and she received a cash distribution of $30,000. Kari's tax basis in her partnership interest at the beginning of the year was $50,000. Her marginal tax rate is 22 percent. Kari qualifies for the Section 199A deduction, without regard to the wage limitation.
a. Calculate the tax cost of Kari's partnership earnings this year.
b. Compute Kari's after-tax cash flow from her partnership activity this year.
c. Compute Kari's tax basis in her partnership interest at the ending of the year. Assume no change in her share of partnership liabilities during the year.
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