Partnership Basis

Remy O$$Neill$,$ Drew O$$Riley$,$ and Megan O$.$ Ferguson formed the WeeBee JAMing Partnership at the beginning of the current year, Year $5.$ Remy and Drew contributed cash and Megan transferred property she had purchased three years ago, which was encumbered with a nonrecourse mortgage for which no one was personally liable. The members plan to use the land and cash to begin a wholesale fruit tree nursery. All three members agree to split profits and losses equally. At the end of the first year, WeeBee JAMing had made a $$15,000$ principal payment on the mortgage. None of the members have passive income from other sources.

Using the information above and the additional information under the Exhibits tab, complete each of the following tables. Enter all amounts rounded to the nearest whole dollar. Negative amounts must be preceded by a $-$ sign. If there is no value needed in the cell, you must enter a $0$ to receive credit for your response.

Part $1$:

Compute the adjusted basis of each member$$s interest immediately after the formation of WeeBee JAMing Partnership.

Description Remy Drew Megan

$1.$ Basis in contributed land

$2.$ Cash contributed

$3.$ Debt allocated to partners

$4.$ Relief from mortgage

$5.$ Gain recognized

$6.$ Partners' beginning adjusted tax basis

Part $2$:

Using the Abbreviated Income Statement $($Document #$5)$ under the Exhibits tab, determine the ordinary business gain or loss for the first year of operations.

Description Amount

Sales

Cost of goods sold

Operating expenses

Guaranteed payment to Megan

Long$-$term capital gains

Municipal bond interest income

Charitable contributions

Section $1231$ gains

Cash distribution to partners at year$-$end

Principal payment on mortgage

Net ordinary business income $($loss$)$

Part $3$:

Determine the amount of each of the separate items of partnership income, gains, losses, and deductions listed below that will be included in each member$$s Schedule K$-1$ for the first year of operations.

Description Remy Drew Megan

Guaranteed payment

Long$-$term capital gains

Municipal bond interest income

Charitable contributions

Section $1231$ gains

Self$-$employment income $($loss$)$

Total Schedule K$-1$ items

Part $4$:

Compute the partners$$ adjusted bases in their partnership interests at the end of the first year of operations.

Description Remy Drew Megan

Partners$$ beginning adjusted tax basis

Deemed cash distribution

Actual cash distribution

Schedule K$-1$ items

Partners$$ ending adjusted tax basisDocument #$1$:

Sale of Partnership Interest Agreement

THIS SALE AGREEMENT $($the "Agreement"$)$ made and entered into this ${31}^{st}$ day of

December, Year $5$

BETWEEN:

Cha$-$Cha Rhoades $($the "Seller"$)$ of $68$ South Ave, Edgar, MO $54987,$ and

Georgia Jensen $($the "Buyer"$)$ of $4887$ North Rd$,$ Edgar, MO $54887$

IN CONSIDERATION OF and as a condition of the Partners entering into this Agreement,

the receipt and sufficiency of which consideration is acknowledged, the parties agree as

follows:

For consideration of $$100,000$ the Seller's $30$ percent interest $($ $$105,000$ basis$)$ in the

ChaBoom Partnership, including the Seller's portion of Partnership liabilities, will be sold to

the Buyer, as of December $31,$ Year $5.$