Required information [The following information applies to the questions displayed below.] The TimpRiders LP has operated a motorcycle dealership for a number of years. Amir is the limited partner, Francesca is the general partner, and they share capital and profits equally. Francesca works full time managing the partnership. Both the partnership and the partners report on a calendar-year basis. At the start of the current year, Amir and Francesca had bases of $11,900 and $4,100, respectively, and the partnership did not have any liabilities. During the current year, the partnership reported the following results from operations: Net sales Cost of goods sold Operating expenses Short-term capital loss Tax-exempt interest §1231 gain $ 684,000 511,000 186,000 2,800 3,100 7,100 On the last day of the year, the partnership distributed $4,100 each to Amir and Francesca. Required: a. What outside basis do Amir and Francesca have in their partnership interests at the end of the year? b. How much of their losses are currently not deductible by Amir and Francesca because of the tax-basis limitation? c. To what extent does the passive activity loss limitation apply in restricting their deductible losses for the year? Note: For all the requirements, negative amounts should be entered with a minus sign. Leave no answers blank. Enter zero if applicable. Answer is complete but not entirely correct. a. Year-end basis b. Loss limited by tax basis c. Loss limited by passive activity Amir Francesca $ 3,000 ( $ 0 $ 0 $ (2,800) $ (2,800) C $ 0
Required information [The following information applies to the questions displayed below.] The TimpRiders LP has operated a motorcycle dealership for a number of years. Amir is the limited partner, Francesca is the general partner, and they share capital and profits equally. Francesca works full time managing the partnership. Both the partnership and the partners report on a calendar-year basis. At the start of the current year, Amir and Francesca had bases of $11,900 and $4,100, respectively, and the partnership did not have any liabilities. During the current year, the partnership reported the following results from operations: Net sales Cost of goods sold Operating expenses Short-term capital loss Tax-exempt interest §1231 gain $ 684,000 511,000 186,000 2,800 3,100 7,100 On the last day of the year, the partnership distributed $4,100 each to Amir and Francesca. Required: a. What outside basis do Amir and Francesca have in their partnership interests at the end of the year? b. How much of their losses are currently not deductible by Amir and Francesca because of the tax-basis limitation? c. To what extent does the passive activity loss limitation apply in restricting their deductible losses for the year? Note: For all the requirements, negative amounts should be entered with a minus sign. Leave no answers blank. Enter zero if applicable. Answer is complete but not entirely correct. a. Year-end basis b. Loss limited by tax basis c. Loss limited by passive activity Amir Francesca $ 3,000 ( $ 0 $ 0 $ (2,800) $ (2,800) C $ 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
Question
![Required information
[The following information applies to the questions displayed below.]
The TimpRiders LP has operated a motorcycle dealership for a number of years. Amir is the limited partner, Francesca is
the general partner, and they share capital and profits equally. Francesca works full time managing the partnership. Both
the partnership and the partners report on a calendar-year basis. At the start of the current year, Amir and Francesca had
bases of $11,900 and $4,100, respectively, and the partnership did not have any liabilities. During the current year, the
partnership reported the following results from operations:
Net sales
Cost of goods sold
Operating expenses
Short-term capital loss
Tax-exempt interest
§1231 gain
$ 684,000
511,000
186,000
2,800
3,100
7,100
On the last day of the year, the partnership distributed $4,100 each to Amir and Francesca.
Required:
a. What outside basis do Amir and Francesca have in their partnership interests at the end of the year?
b. How much of their losses are currently not deductible by Amir and Francesca because of the tax-basis limitation?
c. To what extent does the passive activity loss limitation apply in restricting their deductible losses for the year?
Note: For all the requirements, negative amounts should be entered with a minus sign. Leave no answers blank. Enter zero if
applicable.
Answer is complete but not entirely correct.
a. Year-end basis
b. Loss limited by tax basis
Amir
Francesca
$ 3,000
$
0
$
0
$ (2,800) (
0
c. Loss limited by passive activity
$ (2,800)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdbd4491b-63a6-4ca8-a32b-64c6be45de74%2Fef725bb8-c0b4-429c-b6c7-a3c030976c2f%2Fy8mupmq_processed.png&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
The TimpRiders LP has operated a motorcycle dealership for a number of years. Amir is the limited partner, Francesca is
the general partner, and they share capital and profits equally. Francesca works full time managing the partnership. Both
the partnership and the partners report on a calendar-year basis. At the start of the current year, Amir and Francesca had
bases of $11,900 and $4,100, respectively, and the partnership did not have any liabilities. During the current year, the
partnership reported the following results from operations:
Net sales
Cost of goods sold
Operating expenses
Short-term capital loss
Tax-exempt interest
§1231 gain
$ 684,000
511,000
186,000
2,800
3,100
7,100
On the last day of the year, the partnership distributed $4,100 each to Amir and Francesca.
Required:
a. What outside basis do Amir and Francesca have in their partnership interests at the end of the year?
b. How much of their losses are currently not deductible by Amir and Francesca because of the tax-basis limitation?
c. To what extent does the passive activity loss limitation apply in restricting their deductible losses for the year?
Note: For all the requirements, negative amounts should be entered with a minus sign. Leave no answers blank. Enter zero if
applicable.
Answer is complete but not entirely correct.
a. Year-end basis
b. Loss limited by tax basis
Amir
Francesca
$ 3,000
$
0
$
0
$ (2,800) (
0
c. Loss limited by passive activity
$ (2,800)
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