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 basis of $11,700 and $4,300, 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 $ 690,000 516,000 188,000 3,400 Operating expenses Short-term capital loss Tax-exempt interest §1231 gain On the last day of the year, the partnership distributed $4,300 each to Amir and Francesca. 3,300 7,300 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?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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
basis of $11,700 and $4,300, 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
On the last day of the year, the partnership distributed $4,300 each to Amir and Francesca.
$ 690,000
516,000
188,000
3,400
3,300
7,300
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?
Transcribed Image Text: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 basis of $11,700 and $4,300, 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 On the last day of the year, the partnership distributed $4,300 each to Amir and Francesca. $ 690,000 516,000 188,000 3,400 3,300 7,300 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?
> Answer is complete but not entirely correct.
Amir
a. Year-end basis
b. Loss limited by tax basis
c. Loss limited by passive activity
Francesca
S
S
$
$
S (8,300) X S
4,000
0
0
(3,900) X
0
Transcribed Image Text:> Answer is complete but not entirely correct. Amir a. Year-end basis b. Loss limited by tax basis c. Loss limited by passive activity Francesca S S $ $ S (8,300) X S 4,000 0 0 (3,900) X 0
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