Aaron, Deanne, and Keon formed the Blue Bell General Partnership at the beginning of the current year. Aaron and Deanne each contributed $108,000 and Keon transferred an acre of undeveloped land to the partnership. The land had a tax basis of $72,000 and was appraised at $180,000. The land was also encumbered with a $72,000 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 $6,300 principal payment on the mortgage. For the first year of operations, the partnership records disclosed the following information: Sales revenue $ 470,000 Cost of goods sold 450,000 Operating expenses 55,000 Long-term capital gains 2,100 §1231 gains 900 Charitable contributions 300 Municipal bond interest 300 Salary paid as a guaranteed payment to Deanne (not included in expenses) 3,000 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 $108,000 and Keon transferred an acre of undeveloped land to the partnership. The land had a tax basis of $72,000 and was appraised at $180,000. The land was also encumbered with a $72,000 nonrecourse mortgage for which no one was personally liable. All three partners agreed to split
| Sales revenue | $ 470,000 |
|---|---|
| Cost of goods sold | 450,000 |
| Operating expenses | 55,000 |
| Long-term |
2,100 |
| §1231 gains | 900 |
| Charitable contributions | 300 |
| Municipal bond interest | 300 |
| Salary paid as a guaranteed payment to Deanne (not included in expenses) | 3,000 |
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a. Compute the adjusted basis of each partner’s interest in the partnership immediately after the formation of the partnership.
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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.
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d. What are the partners’ adjusted bases in their partnership interests at the end of the first year of operations?
Sales revenue= $470,000
Cost of goods sold= $450,000
Operating expenses= $55,000
Long-term capital gains= $2,100
1231 gains= $900
Charitable contributions =$300
Municipal bond interest=$300
Salary paid as a guaranteed payment to Deanne (not included in expenses)= $3,000
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