B 1 2 B 5 5 Erin and Kathy form a partnership with Erin contributing $700 and Kathy contributing $300. The partners have agreed that Erin will first receive a return of her $700 investment, then Kathy will receive her $300 contribution and any additional distributions will be made 70 percent to Erin and 30 percent to Kathy. Year 1 book income is $100. At the end of Year 1 partnership assets have a book value $1,100 (the original contributions increased by Year 1 income). 1 How much Year 1 income will be allocated to Erin and Kathy? Clearly explain your answer. Question 5 Part 2 The facts are the same as in Part 1 except Year 1 produces a book loss of $100. At the end of 3 Year 1, partnership assets have a book value of $900 (the original contributions reduced by Year 1 loss).

B 1 2 B 5 5 Erin and Kathy form a partnership with Erin contributing $700 and Kathy contributing $300. The partners have agreed that Erin will first receive a return of her $700 investment, then Kathy will receive her $300 contribution and any additional distributions will be made 70 percent to Erin and 30 percent to Kathy. Year 1 book income is $100. At the end of Year 1 partnership assets have a book value $1,100 (the original contributions increased by Year 1 income). 1 How much Year 1 income will be allocated to Erin and Kathy? Clearly explain your answer. Question 5 Part 2 The facts are the same as in Part 1 except Year 1 produces a book loss of $100. At the end of 3 Year 1, partnership assets have a book value of $900 (the original contributions reduced by Year 1 loss).

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter7: Losses—deductions And Limitations

Section: Chapter Questions

Problem 92TPC

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