In Year 1 you invested $500,000 in exchange for a 15% partnership interest in ABC, LP. Here are some additional facts: Year 1: ABC had ordinary business income of $3.4 million for the year; it had no other categories of income or deductible expense; during Year 1 you received a cash distribution from ABC of $400,000.Year 2: ABC had ordinary business income of $4.6 million for the year; it had no other categories of income or deductible expense; during Year 2 you received a cash distribution from ABC of $500,000.Year 3: ABC had ordinary business income of $1.8 million for the year; it had no other categories of income or deductible expense; during Year 3 you received a cash distribution from ABC of $450,000.Year 4: ABC had an ordinary business loss of $2.75 million for the year; it had no other categories of income or deductible expense; during Year 4 you received no cash distributions from ABC but did make a $125,000 additional capital contribution. What is your adjusted basis in your ABC partnership interest as of the beginning of Year 5? (Showing calculations optional.)

working : income of share 15% of business income 1. $3.4 million = ( $3.4 million *15%) = $510000…

Answered: In Year 1 you invested $500,000 in…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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In Year 1 you invested $500,000 in exchange for a 15% partnership interest in ABC, LP. Here are some additional facts:

Year 1: ABC had ordinary business income of $3.4 million for the year; it had no other categories of income or deductible expense; during Year 1 you received a cash distribution from ABC of $400,000.
Year 2: ABC had ordinary business income of $4.6 million for the year; it had no other categories of income or deductible expense; during Year 2 you received a cash distribution from ABC of $500,000.
Year 3: ABC had ordinary business income of $1.8 million for the year; it had no other categories of income or deductible expense; during Year 3 you received a cash distribution from ABC of $450,000.
Year 4: ABC had an ordinary business loss of $2.75 million for the year; it had no other categories of income or deductible expense; during Year 4 you received no cash distributions from ABC but did make a $125,000 additional capital contribution.

What is your adjusted basis in your ABC partnership interest as of the beginning of Year 5? (Showing calculations optional.)

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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