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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb4425dd8-bb5b-41e7-a933-1115e10b29a9%2F0db050e6-37b6-4646-8821-0a96f6ef0ec5%2Fwnormnzi_processed.png&w=3840&q=75)
Transcribed Image Text: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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