Tax Return Problem #1

Paul and Wayne equally own the PW Partnership. Pauls basis was $30,000 and Waynes basis was $22,000 at the beginning of the year. PW Partnership had the following income and expense items:

Sales $330,000

Cost of goods sold 220,000

Guaranteed payment to Paul 40,000

Rent expense 24,000

Depreciation 33,000

Interest expense 4,000

Tax-exempt income 3.000

Health insurance premiums for Paul 3,600

Health insurance premiums for Wayne 3.600

a. Prepare page 1 and page 3 of form 1065 - ordinary income and separately stated items for the partnership.

b. Calculate Pauls basis in his partnership interest.

c. Calculate Waynes basis in his partnership interest.