Problem 10-47 (LO. 3, 7, 9, 10, 11) Suzy contributed assets valued at $360,000 (basis of $200,000) in exchange for her 40% interest in Suz-Anna GP (a general partnership in which both partners are active owners). Anna contributed land and a building valued at $640,000 (basis of $380,000) in exchange for the remaining 60% interest. Anna's property was encumbered by qualified nonrecourse financing of $100,000, which was assumed by the partnership The partnership reports the following income and expenses for the current tax year. Sales Utilities, salaries, depreciation, and other operating expenses Short-term capital gain Tax-exempt interest income Charitable contributions (cash) $560,000 360,000 10,000 4,000 8,000 10,000 20,000 Distribution to Suzy Distribution to Anna During the current tax year, Suz-Anna refinanced the land and building (i.e., the original $100,000 debt was repaid and replaced with new debt). At the end of the year, Suz-Anna held recourse debt of $100,000 for partnership accounts payable (recourse to the partnership but not personally guaranteed by either of the partners) and qualified nonrecourse financing of $200,000. a. What is Suzy's basis in Suz-Anna after formation of the partnership? Anna's basis? Suzy's beginning basis in her partnership interest is $ 240,000, and Anna's basis is $ 340,000 - b. Enter the amounts for the following items that will appear on Suzy's Schedule K-1. Item Amount Ordinary income $ 80,000 Short-term capital gain 4,000 Tax-exempt interest income 1,600 Charitable contributions 3,200 Distribution received by Suzy $ 10,000 What income, deduction, and taxes does Suzy report on her tax return? On her tax return, Suzy reports the ordinary income on Schedule E . She reports the short-term capital gain on Schedule D She reports the charitable contributions Schedule A with her personal charitable contributions. Suzy might also be eligible for the qualified business income deduction; the partnership needs to provide additional information regarding depreciable property and cost of goods sold so that Suzy can calculate the deduction. Suzy is not subject to self- employment taxes. c. Assume that all partnership debts are shared proportionately. At the end of the tax year, what are Suzy's basis and amount at risk in her partnership interest? Suzy's year-end basis in her partnership interest is $ 392,400, and Suzy's amount at risk is $ 392,400 d. Assume that Suz-Anna prepares the capital account rollforward on the partners' Schedules K-1 on a tax basis. What are Suzy's capital account balances at the beginning and end of the tax year? What accounts for the difference between Suzy's ending capital account and her ending tax basis in the partnership interest? Suzy's capital account balance at the beginning of the tax year is $ land at the end of the tax year is $ The capital account include the partner's share of liabilities. share of partnership In this situation, Suzy's ending capital account differs from her ending tax basis, because her $ liabilities included in her ending capital account. e. What would happen if Suz-Anna was formed as an LLC instead of a general partnership. How would Suz-Anna's ending liabilities be treated? How would Suzy's basis and amount at risk be different? in the of the LLC members are personally liable for the accounts payable of the LLC. They are members' bases in their LLC interests and in the amounts at risk. in the LLC of the LLC members are personally liable for the nonrecourse debt of the LLC. It is members' bases as a nonrecourse debt and in the amount at risk. UTI Suzy's ending basis in the LLC interest is $ , and the amount at risk in her LLC interest is $ Problem 10-47 (LO. 3, 7, 9, 10, 11) Suzy contributed assets valued at $360,000 (basis of $200,000) in exchange for her 40% interest in Suz-Anna GP (a general partnership in which both partners are active owners). Anna contributed land and a building valued at $640,000 (basis of $380,000) in exchange for the remaining 60% interest. Anna's property was encumbered by qualified nonrecourse financing of $100,000, which was assumed by the partnership The partnership reports the following income and expenses for the current tax year. Sales Utilities, salaries, depreciation, and other operating expenses Short-term capital gain Tax-exempt interest income Charitable contributions (cash) $560,000 360,000 10,000 4,000 8,000 10,000 20,000 Distribution to Suzy Distribution to Anna During the current tax year, Suz-Anna refinanced the land and building (i.e., the original $100,000 debt was repaid and replaced with new debt). At the end of the year, Suz-Anna held recourse debt of $100,000 for partnership accounts payable (recourse to the partnership but not personally guaranteed by either of the partners) and qualified nonrecourse financing of $200,000. a. What is Suzy's basis in Suz-Anna after formation of the partnership? Anna's basis? Suzy's beginning basis in her partnership interest is $ 240,000, and Anna's basis is $ 340,000 - b. Enter the amounts for the following items that will appear on Suzy's Schedule K-1. Item Amount Ordinary income $ 80,000 Short-term capital gain 4,000 Tax-exempt interest income 1,600 Charitable contributions 3,200 Distribution received by Suzy $ 10,000 What income, deduction, and taxes does Suzy report on her tax return? On her tax return, Suzy reports the ordinary income on Schedule E . She reports the short-term capital gain on Schedule D She reports the charitable contributions Schedule A with her personal charitable contributions. Suzy might also be eligible for the qualified business income deduction; the partnership needs to provide additional information regarding depreciable property and cost of goods sold so that Suzy can calculate the deduction. Suzy is not subject to self- employment taxes. c. Assume that all partnership debts are shared proportionately. At the end of the tax year, what are Suzy's basis and amount at risk in her partnership interest? Suzy's year-end basis in her partnership interest is $ 392,400, and Suzy's amount at risk is $ 392,400 d. Assume that Suz-Anna prepares the capital account rollforward on the partners' Schedules K-1 on a tax basis. What are Suzy's capital account balances at the beginning and end of the tax year? What accounts for the difference between Suzy's ending capital account and her ending tax basis in the partnership interest? Suzy's capital account balance at the beginning of the tax year is $ land at the end of the tax year is $ The capital account include the partner's share of liabilities. share of partnership In this situation, Suzy's ending capital account differs from her ending tax basis, because her $ liabilities included in her ending capital account. e. What would happen if Suz-Anna was formed as an LLC instead of a general partnership. How would Suz-Anna's ending liabilities be treated? How would Suzy's basis and amount at risk be different? in the of the LLC members are personally liable for the accounts payable of the LLC. They are members' bases in their LLC interests and in the amounts at risk. in the LLC of the LLC members are personally liable for the nonrecourse debt of the LLC. It is members' bases as a nonrecourse debt and in the amount at risk. UTI Suzy's ending basis in the LLC interest is $ , and the amount at risk in her LLC interest is $