Ben and Jerry formed a partnership several years ago. They share profits and losses equally and the allocations allowed in accordance with their partnership agreement have, to date, had substantial economic effect. On December 31st, 2020, Ben’s capital account, for book purposes, was $2,000. Jerry’s capital account was $3,000 on the same date. During 2021, the partnership earned $600 of ordinary income and $100 of tax-exempt bond interest. In addition, during the course of the year, the partnership distributed jewelry to Jerry. The partnership’s book basis in the jewelry was $1,000 on January 1, 2021. However, the fair market value of the jewelry on the date of the distribution was $2,000. The partnership’s tax basis in the jewelry was $500 at the time of the distribution. Assuming that the partnership engaged in no other transactions during 2020 besides those described above, the value of Jerry’s book capital accounts at the end of 2021 is: Answers: a. $1,300. b. $2,350. c. $1,800. d. $1,850. e. $1,350.
Ben and Jerry formed a
Answers: a. $1,300. b. $2,350. c. $1,800. d. $1,850. e. $1,350.
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