Aaron, Deanne, and Keon formed the Blue Bell General Partnership at the beginning of the current year. Aaron and Deanne each contributed $110,000, and Keon transferred an acre of undeveloped land to the partnership. The land had a tax basis of $70,000 and was appraised at $180,000. The land was also encumbered with a $70,000 nonrecourse mortgage for which no one was personally liable. All three partners agreed to split profits and losses equally. At the end of the first year, Blue Bell made a $7,000 principal payment on the mortgage. For the first year of operations, the partnership records disclosed the following information: Sales revenue Cost of goods sold Operating expenses $ 470,000 410,000 Long-term capital gains §1231 gains Charitable contributions Municipal bond interest Salary paid as a guaranteed payment to Deanne (not included in expenses) 70,000 2,400 900 300 300 3,000 Required: a. Compute the adjusted basis of each partner's interest in the partnership immediately after the formation of the partnership. b.List the separate items of partnership income, gains, losses, and deductions that the partners must show on their individual income tax returns that include the results of the partnership's first year of operations. d. What are the partners' adjusted bases in their partnership interests at the end of the first year of operations?
Aaron, Deanne, and Keon formed the Blue Bell General Partnership at the beginning of the current year. Aaron and Deanne each contributed $110,000, and Keon transferred an acre of undeveloped land to the partnership. The land had a tax basis of $70,000 and was appraised at $180,000. The land was also encumbered with a $70,000 nonrecourse mortgage for which no one was personally liable. All three partners agreed to split profits and losses equally. At the end of the first year, Blue Bell made a $7,000 principal payment on the mortgage. For the first year of operations, the partnership records disclosed the following information: Sales revenue Cost of goods sold Operating expenses $ 470,000 410,000 Long-term capital gains §1231 gains Charitable contributions Municipal bond interest Salary paid as a guaranteed payment to Deanne (not included in expenses) 70,000 2,400 900 300 300 3,000 Required: a. Compute the adjusted basis of each partner's interest in the partnership immediately after the formation of the partnership. b.List the separate items of partnership income, gains, losses, and deductions that the partners must show on their individual income tax returns that include the results of the partnership's first year of operations. d. What are the partners' adjusted bases in their partnership interests at the end of the first year of operations?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Aaron, Deanne, and Keon formed the Blue Bell General Partnership at the beginning of the current year. Aaron and
Deanne each contributed $110,000, and Keon transferred an acre of undeveloped land to the partnership. The land had a
tax basis of $70,000 and was appraised at $180,000. The land was also encumbered with a $70,000 nonrecourse
mortgage for which no one was personally liable. All three partners agreed to split profits and losses equally. At the end of
the first year, Blue Bell made a $7,000 principal payment on the mortgage. For the first year of operations, the partnership
records disclosed the following information:
Sales revenue
Cost of goods sold
Operating expenses
$ 470,000
410,000
Long-term capital gains
§1231 gains
Charitable contributions
Municipal bond interest
Salary paid as a guaranteed payment to Deanne (not
included in expenses)
70,000
2,400
900
300
300
3,000
Required:
a. Compute the adjusted basis of each partner's interest in the partnership immediately after the formation of the partnership.
b.List the separate items of partnership income, gains, losses, and deductions that the partners must show on their individual income
tax returns that include the results of the partnership's first year of operations.
d. What are the partners' adjusted bases in their partnership interests at the end of the first year of operations?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education