Question

KLMN Partnerships financial records show the following:
gross receiptd from sales	$      670,000.00
cost of goods sold	$     (460,000.00)
operating expenses	$       (96,800.00)
business meals and expenses	$         (6,240.00)
section 1231 loss on equipment sale	$       (13,500.00)
charitable contribution	$         (1,500.00)
distribution of partners	$       (10,000.00)
Refer to the facts in the preceding problem. Mr. T is a 10 percent general partner in KLMN. During the year, he received a $1000 cash distribution from KLMN.
A. Compute Mr. T's share of partnership ordinary income and seperately stated items.
B. If Mr. T's adjusted basis in his KLMN interest was $45000 at the beginning of the year, compute his adjusted basis at the end of the year. Assume that KLMN's debt did not change during the year.
C. How would your basis computation change if KLMN's debt at the end of the year was $28000 more than its debt at the beginning of the year?

Answer 1

a. Mr. T has the following shares.

Ordinary business income $11,008

Separately stated items: Section 1231 loss (1,350)

Charitable contribution (150)

Nondeductible expense (312)

b. Mr. T’s adjusted basis at beginning of year $45,000

Increased by ordinary business income 11,008

Decreased by: Cash distribution (1,000)

Section 1231 loss (1,350)

Charitable contribution (150)

Nondeductible expense (312)

Mr. T’s adjusted basis at end of year $53,196

c. Mr. T’s adjusted basis would increase to $55,996 ($53,196 + 10% [$28,000 increase in partnership debt]).