Kanye contributed a piece of land (FMV = $300,000; AB = $200,000) in exchange for a 50% capitaland profit (and loss) interest in KW Partnership. KW reported the following income and expensesfor last tax year:• Sales revenue: $700,000• 1231 gain: $60,000• Long-term capital loss: $10,000• Qualified dividends: $10,000• W-2 wages paid to employees: $200,000• Utilities: $140,000• Rent: $180,000No distributions were made last year.This year, KW took out a loan. Kanye's allocable share of the partnership liability is $20,000. Thepartnership intends to pay the entire loan balance off in 3 years with one lump sum payment.Which of the following are accurate? Select all that apply.Kanye's outside basis is increased by $20,000 as a result of the loanKanye's capital account balance is increased by $20,000 as a result of the loanWhen the partnership pays off the loan, Kanye's outside basis will decrease by $20,000When the partnership pays off the loan, Kanye's capital account balance will decrease by $20,000Partnership liabilities do not affect a partner's outside basis or capital account balance

Outside basis represents the adjusted basis of the partnership interest of the partners in the…

Kanye contributed a piece of land (FMV = $300,000; AB = $200,000) in exchange for a 50% capital and profit (and loss) interest in KW Partnership. KW reported the following income and expenses for last tax year: t700 000

Kanye contributed a piece of land (FMV = $300,000; AB = $200,000) in exchange for a 50% capital and profit (and loss) interest in KW Partnership. KW reported the following income and expenses for last tax year: t700 000

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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Question

Kanye contributed a piece of land (FMV = $300,000; AB = $200,000) in exchange for a 50% capital
and profit (and loss) interest in KW Partnership. KW reported the following income and expenses
for last tax year:
• Sales revenue: $700,000
• 1231 gain: $60,000
• Long-term capital loss: $10,000
• Qualified dividends: $10,000
• W-2 wages paid to employees: $200,000
• Utilities: $140,000
• Rent: $180,000
No distributions were made last year.
This year, KW took out a loan. Kanye's allocable share of the partnership liability is $20,000. The
partnership intends to pay the entire loan balance off in 3 years with one lump sum payment.
Which of the following are accurate? Select all that apply.
Kanye's outside basis is increased by $20,000 as a result of the loan
Kanye's capital account balance is increased by $20,000 as a result of the loan
When the partnership pays off the loan, Kanye's outside basis will decrease by $20,000
When the partnership pays off the loan, Kanye's capital account balance will decrease by $20,000
Partnership liabilities do not affect a partner's outside basis or capital account balance

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