sah Problem: Module 7 Textbook Problem 6Learning Objectives:⚫ 7-6 Adjust the tax basis in a partnership interest⚫ 7-7 Apply the basis limitation on the deduction of partnership lossesOn January 1, Year 1, Carrot, an individual, paid $16,400 for 5 percent of the stock in Root Corp., an Scorporation. In November, he loaned $9,350 to Root Corp. in return for a promissory note. Root Corp.generated a $752,000 operating loss in Year 1.Required:a. How much of his share of the loss can Carrot deduct on his Year 1 return?b. Compute Carrot's basis in his Root Corp. stock and his Root Corp. note at the end of Year 1.

Step 1: Calculate Carrot's share of the lossCarrot owns 5% of Root Corp., so his share of the loss…

Answered: Problem: Module 7 Textbook Problem 6…

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter19: Accounting For Partnerships

Section: Chapter Questions

Problem 3SEA

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Problem: Module 7 Textbook Problem 3 Learning Objectives: • 7-5 Differentiate between a distributive share of partnership income and cash flow • 7-6 Adjust the tax basis in a partnership interest Garlic, an individual, is a limited partner in Onion Partnership. This year, Garlic's share of partnership ordinary income is $20,000, and she received a cash distribution of $30,000. Garlic's tax basis in her partnership interest at the beginning of the year was $50,000. Her marginal tax rate is 22 percent. Garlic qualifies for the QBI deduction, without regard to any limitations on this QBI deduction. Required: a. Calculate the tax cost of Garlic's partnership earnings this year. Tax cost b. Compute Garlic's after-tax cash flow from her partnership activity this year. After-tax cash flow c. Compute Garlic's tax basis in her partnership interest at the ending of the year. Assume no change in her share of partnership liabilities during the year. Tax basis at the end of the year
2022 tax rules
None
Problem 14-54 (LO 14-2, 14-3) Wade has a beginning basis in a partnership of $23,000. His share of income and expense from the partnership consists of the following amounts: Ordinary income Guaranteed payment Long-term capital gain 5 1231 gain Charitable contributions $ 179 expense Cash distribution Required: a. What is Wade's self-employment income? $ 43,000 12,000 15,500 4,300 2,000 b. Calculate Wade's basis at the end of the year. 18,000 6,000 a. Self-employment income b. Ending basis Amount
Question Content Area Emmett and Sierra formed a partnership dividing income as follows: Annual salary allowance to Emmett of $37,200 Interest of 8% on each partner's capital balance on January 1 Any remaining net income divided equally. Emmett and Sierra had $23,800 and $143,800, respectively in their January 1 capital balances. Net income for the year was $225,800. How much net income should be distributed to Emmett?
Vikram Bhai
Problem: Module 7 Textbook Problem 8 Learning Objective: 7-6 Adjust the tax basis in a partnership interest On January 1, Year 1, Radish, an individual, paid $15,000 for 5 percent of the stock in Root Corp., an S corporation. In November Year 1, he loaned $8,000 to Root Corp. in return for a promissory note. Root Corp. generated a $600,000 operating loss in Year 1. Root Corp. generated $220,000 ordinary business income in Year 2. In Year 3, Root Corp. repaid its $8,000 debt to Radish before he restored any basis in the debt. Required: How much gain or loss, if any, will Radish recognize as a result of the debt repayment in Year 3? Gain Answer is complete but not entirely correct. $ 8,000
Problem 14-23 (LO. 5, 6) The BCD Partnership plans to distribute cash of $20,000 to partner Barb at the end of the tax year. The partnership reported a loss for the year, and Barb's share of the loss is $10,000. Barb holds a basis of $15,000 in the partnership interest, including her share of partnership liabilities. The partnership expects to report substantial income in future years. If an amount is zero, "0". a. Generally, in what order are the allocated items applied for calculating Barb's ending basis in the BCD Partnership interest? • Losses may be deducted under § 704(d). • Distributions from the partnership decrease basis. • Contributions and income items increase the basis. • Allocation of deductions. b. As a result of the $20,000 distribution, Barb's basis is $fill in the blank d98d8cf89ff4fe3_1 and reports a $fill in the blank d98d8cf89ff4fe3_2 for the tax year due to the distribution. c. How will the deduction…
Question 1 • Rachael and Olivia are business partners in RO Dance Their partnership agreement states that the partners will share income in a 3:1 ratio (Rachael, Olivia). Part of the agreement includes a salary allowance of $43,000 for Rachael and $26,000 for Olivia. For the current year. RO Dance has a net loss of $5,000. The entries to close the income summary account after allocating the loss to the partners include • a debit to Rachael, Capital $12,500 and a credit to Olivia, Capital $7,500 a credit to Rachael, Capital $12,500 and a debit to Olivia, Capital $7,500 • a debit to Rachael, Capital $12,500 and a debit to Olivia, Capital $7,500 • a credit to Rachael, Capital $12,500 and a credit to Olivia, Capital $7,500 None of these choices are correct
Distribution of Profit in Capital Ratio Problem 8 On Jan. 1, 2019 Puja and Neha started a business in partnership with *20,000 and 12,000 respectively as capital. They agree to share profits in the capital ratio. They have the following transactions during the Date Capital Introduced year: Amount Withdrawn Puja Neha ₹ 1st April 5,000 1st Aug. 8,000 1st Oct. 1st Dec. 5,000 - Puja P 2,000 Neha ₹ 4,000 The business earned a profit of 45,200 during the year ended 31st December, 2019. Distribute the profits in capital ratio and pass a Journal entry for the distribution of profit.
• 7-7 Apply the basis limitation on the deduction of partnership losses On January 1, Year 1, Ginger, an individual, paid $24,000 for 6 percent of the stock in Root Corp., an S corporation. In November Year 1, he loaned $12,000 to Root Corp. in return for a promissory note. Root Corp. generated a $790,000 operating loss in Year 1. Root Corp. generated $427,000 ordinary business income in Year 2. Required: a. How much of Ginger's share of this income is included in his Year 2 taxable income? b. Compute Ginger's basis in his Root Corp. stock and his Root Corp. note at the end of Year 2. c. How would your answers to parts a and b change if Root Corp.'s ordinary business income was only $239,000? Answer is not complete. Complete this question by entering your answers in the tabs below. Req A and B Req C a. How much of Ginger's share of this income is included in his Year 2 taxable income? b. Compute Ginger's basis in his Root Corp. stock and his Root Corp. note at the end of Year 2. Amount…
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