Abel, Ben, and Carol form New General Partnership at the beginning of the current year. Abel and Ben each contribute 100,000 to the partnership, and Carol contribute land to the partnership. Carol has a basis in the land of $70,000 and the land had a fair market value at the time of the contribution to the partnership of 170,000 and was encumbered by a $60.000 nonrecourse mortgage for which no one was personally liable. All three partners agreed to split profits and losses from the partnership equally. At the end of the first year of operation, the partnership made a payment of $6,000 on the mortgage on the land. At the end of the first year of operation of the partnership, the partnership records disclose the following information: Sales revenue Cost of goods sold Operating expenses Long-term capital gain Section 1231 gain Charitable contributions Municipal bond interest received 300 Salary paid to Ben as a guaranteed payment 3,000 (a) Determining adjusted basis: Calculate the adjusted outside basis of each partner's interest in the partnership at the end of the first year of partnership operations. $490,000 450,000 63,000 2,400 900 600 (b) Determining separately stated items: What amount of partnership income will be allocated to each partner at the end of the first year that the partnership operates, and what separately stated items will be allocated to each partner?
Abel, Ben, and Carol form New General Partnership at the beginning of the current year. Abel and Ben each contribute 100,000 to the partnership, and Carol contribute land to the partnership. Carol has a basis in the land of $70,000 and the land had a fair market value at the time of the contribution to the partnership of 170,000 and was encumbered by a $60.000 nonrecourse mortgage for which no one was personally liable. All three partners agreed to split profits and losses from the partnership equally. At the end of the first year of operation, the partnership made a payment of $6,000 on the mortgage on the land. At the end of the first year of operation of the partnership, the partnership records disclose the following information: Sales revenue Cost of goods sold Operating expenses Long-term capital gain Section 1231 gain Charitable contributions Municipal bond interest received 300 Salary paid to Ben as a guaranteed payment 3,000 (a) Determining adjusted basis: Calculate the adjusted outside basis of each partner's interest in the partnership at the end of the first year of partnership operations. $490,000 450,000 63,000 2,400 900 600 (b) Determining separately stated items: What amount of partnership income will be allocated to each partner at the end of the first year that the partnership operates, and what separately stated items will be allocated to each partner?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
K 13
Transcribed Image Text:Abel, Ben, and Carol form New General Partnership at the beginning of the current year. Abel and Ben each contribute
100,000 to the partnership, and Carol contribute land to the partnership. Carol has a basis in the land of $70,000 and the
land had a fair market value at the time of the contribution to the partnership of 170,000 and was encumbered by a
$60.000 nonrecourse mortgage for which no one was personally liable. All three partners agreed to split profits and
losses from the partnership equally. At the end of the first year of operation, the partnership made a payment of $6,000
on the mortgage on the land. At the end of the first year of operation of the partnership, the partnership records disclose
the following information:
Sales revenue
Cost of goods sold
Operating expenses
Long-term capital gain
Section 1231 gain
Charitable contributions
Municipal bond interest received
300
Salary paid to Ben as a guaranteed payment
3,000
(a) Determining adjusted basis: Calculate the adjusted outside basis of each partner's interest in the partnership at the end
of the first year of partnership operations.
$490,000
450,000
63,000
2,400
900
600
(b) Determining separately stated items: What amount of partnership income will be allocated to each partner at the end
of the first year that the partnership operates, and what separately stated items will be allocated to each partner?
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