Potato, an individual, is a 20 percent owner of Starch LLC. This year, Potato was allocated $45,000 of ord LLC, $1,000 of tax-exempt interest income, and $2,000 of nondeductible expenses. Potato also received Starch LLC this year. At the beginning of the year, Starch LLC had outstanding debt of $100,000. At the em outstanding debts increased to $130,000. Required:
Potato, an individual, is a 20 percent owner of Starch LLC. This year, Potato was allocated $45,000 of ord LLC, $1,000 of tax-exempt interest income, and $2,000 of nondeductible expenses. Potato also received Starch LLC this year. At the beginning of the year, Starch LLC had outstanding debt of $100,000. At the em outstanding debts increased to $130,000. Required:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Problem: Module 7 Textbook Problem 10
Learning Objective: 7-9 Identify similarities and differences in the tax treatment of S corporations versus partnerships
Potato, an individual, is a 20 percent owner of Starch LLC. This year, Potato was allocated $45,000 of ordinary income from Starch
LLC, $1,000 of tax-exempt interest income, and $2,000 of nondeductible expenses. Potato also received a $10,000 distribution from
Starch LLC this year. At the beginning of the year, Starch LLC had outstanding debt of $100,000. At the end of the year, the entity's
outstanding debts increased to $130,000.
Required:
a. If Starch LLC is taxed as a partnership, and her basis in her partnership interest at the beginning of the year is $30,000, determine
Potato's tax basis in her partnership interest at year-end.
b. If Starch LLC is taxed as an S corporation, and her basis in her S corporation stock at the beginning of the year is $10,000,
determine Potato's tax basis in her corporate stock at year-end.
Complete this question by entering your answers in the tabs below.
Required A Required B
If Starch LLC is taxed as a partnership, and her basis in her partnership interest at the beginning of the year is $30,000,
determine Potato's tax basis in her partnership interest at year-end.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2975bc35-60ec-4b97-a1c1-9cbc572f9d38%2F7afd8f5e-f879-44a9-a355-29a347d14454%2F3p7e14_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem: Module 7 Textbook Problem 10
Learning Objective: 7-9 Identify similarities and differences in the tax treatment of S corporations versus partnerships
Potato, an individual, is a 20 percent owner of Starch LLC. This year, Potato was allocated $45,000 of ordinary income from Starch
LLC, $1,000 of tax-exempt interest income, and $2,000 of nondeductible expenses. Potato also received a $10,000 distribution from
Starch LLC this year. At the beginning of the year, Starch LLC had outstanding debt of $100,000. At the end of the year, the entity's
outstanding debts increased to $130,000.
Required:
a. If Starch LLC is taxed as a partnership, and her basis in her partnership interest at the beginning of the year is $30,000, determine
Potato's tax basis in her partnership interest at year-end.
b. If Starch LLC is taxed as an S corporation, and her basis in her S corporation stock at the beginning of the year is $10,000,
determine Potato's tax basis in her corporate stock at year-end.
Complete this question by entering your answers in the tabs below.
Required A Required B
If Starch LLC is taxed as a partnership, and her basis in her partnership interest at the beginning of the year is $30,000,
determine Potato's tax basis in her partnership interest at year-end.
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