TAX QUESTION

Please do the assignment INDIVIDUALLY

Marcus and Sean are equal partners in a real estate venture, MS Real Estate ("MSRE").They both initial contributed $100,000 five years ago.They agree to share equally the profit and loss of MSRE.

MSRE distributed cash to Marcus and Sean of $50,000 each in 2019.

The income statement for MSRE for the year-ended December 31^st, 2019 is as follows:

Sales $340000

CCA$35000

Salaries to employees60000

Salaries to partners50000

Donations 15000

Gym membership for partners 3000

Meals and entertain 25000 188000

Business Income 152000

Capital gainof sale42000

Capital dividend (not taxable) 12500

Eligible dividendpub co20000

Net income before tax 234000

Required:

A.Compute MSRE's income for tax purposes that should be allocated to Sean.

B.Compute the adjusted cost base of Sean's partnership interest as at December 31^st, 2019 and January 1^st, 2020 assuming that Sean's adjusted cost base of his partnership interest was $93,000 as at January 1^st, 2019.