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.)

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